24 November 2008 Newz Bits

December 1, 2008 at 7:50 am Leave a comment

TALKING POINT

Is the property market resilient?
We are upgrading our call on the property sector from underweight to neutral. Although there may be more negative news in the near term, we believe most of the bad news has already been priced in. This is premised on our belief that the current property downturn will not fall into a crash mode like the 1998 Asian financial crisis. We believe fundamentals of the economy and property market are stronger now and the current
downturn should be more moderate.
More importantly, after seeing prices of property counters falling by 50% to 70% YTD, the downside risk is limited as property stocks under coverage are already trading at distressed valuation similar to the “mini property downcycle” in 2001. However, the change in our stance is more of turning less bearish than turning bullish, as property stocks will still operate under challenging environment over the next 6 – 12 months.

HIGHLIGHTS

On Malaysia
• IJM Corporation bidding for RM1bn worth of contracts in India
• Proton sees opportunities in current global turmoil
On The Global Front
• Canada may be latest to enter into a recession
• Saudi Arabia cuts key interest and reduces reserve levels for commercial banks
REPORTS
• Property Sector (Neutral) – Is the property market resilient?

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IJM Corporation Bhd (IJM MK, Buy, TP: RM6.10) is bidding for RM1bn worth of projects in India, half of which are facilities for the 2010 Commonwealth Games in New Delhi, a top official said. It still has RM2bn existing jobs in that country, which will last the company for three years, deputy chief executive officer Teh Kean Ming told Business Times. “About RM500m works that we are bidding are for car parks and facilities surrounding the Games stadium in New Delhi,” Teh said.
The balance of contracts in bid are mainly road projects in various states in India, Teh added. Works from India and the Middle East make up about half of IJM’s total order book estimated at RM4.6bn currently. (BT)
* * * * *
Malaysian Airline (MAS MK, Buy, TP: RM5.40) will make seasonal adjustments to its capacity but not scrap routes in the current economic slowdown. It aims to make profit from every flight even though there are challenges such as a global lack of demand for passenger air travel, the threat of overcapacity and more competition that puts yields under pressure. (StarBiz)
* * * * *
Star Publications (M) Bhd (STAR MK, Hold, TP: RM3.60) and parties acting in concert now own a 98.51% stake in Singapore-listed Cityneon Holdings Ltd as of Thursday. “Accordingly, the voluntary conditional cash offer is no longer open for acceptance,’’ ANZ Singapore Ltd and AmFraser Securities Pte Ltd said in a statement yesterday on behalf of Laviani Pte Ltd, a wholly owned subsidiary of Star Publications. (Starbiz)
* * * * *
Proton Holdings Bhd’s managing director Datuk Syed Zainal Abidin Syed Mohd Tahir says that the current global turmoil has spawned some opportunities for the national car maker. Syed Zainal says the company has made inroads into key markets overseas but more importantly, that it has had some of the world’s biggest names knocking on its doors to form a strategic collaboration. He declined to disclose the names. “Today we are sitting on an opportunity and we need to act fast,’’ he says, at an interview with BizWeek. He says there is a strong pull currently among global car makers to produce a “small car”, an A class segment that Syed Zainal says is the next new model being drawn up by Proton. (Bizweek)
* * * * *
AirAsia X Sdn Bhd hopes to grow sales by 10 times to US$1bn (RM3.62bn) by the end of 2010, after it achieves its target of becoming a billion-ringgit company next year, said its chief. While close to 30 airlines globally have gone out of business over the past year, AirAsia X has geared itself to reach RM1bn in sales next year by expanding routes. “The psychological test will be reaching the RM1bn mark for 2009, barely two years into operation. But we will do it and target US$1bn for the year after that,” chief executive officer Azran Osman Rani told Business Times last Friday. (BT)
* * * * *
Kuala Lumpur Kepong Bhd’s (KLK) net profit doubled to RM1.04bn for the 2008 financial year ended September (FY08) as it rode on the historic high crude palm oil (CPO) prices earlier this year. Revenue for FY08 jumped 55.03% to RM7.86bn. Te group said the strong performance was due to a higher harvest of fresh fruit bunches. Its manufacturing business had also improved and the disposal of a 60% stake in a manufacturing subsidiary contributed RM86.5m to the bottom line. However, the full-year results were affected by the provision of RM114.2m on overseas-quoted investments and the impairment of assets and goodwill of Davos Life Science Ltd, totaling RM74.4m. (Starbiz)
* * * * *
TSH Resources will continue to pay out the minimum of between 20% and 30% of net profits despite the global financial turmoil and lower crude palm oil, its MD Datuk Dr Kelvin Tan said. He said the company’s profit had been less affected by the fall in CPO prices, as its business in palm oil downstream refining and milling raked in stable margins. (Financial Daily)
* * * * *
IPP’s have yet to pay the levy for October and November as they are still awaiting the decision of the Finance
Ministry on a proposal to restructure the payment period of the windfall profit tax. According to Penjanabebas president
Dr Philip Tan, the members have so far made payments for the months of August and September but have not paid for October and November. Penjanabebas is the umbrella body for IPPs in the country. The total to be paid, according to earlier reports, varies depending on how the levy is calculated and may be up to RM550mil spread over 12 months. Originally payable annually, the Government had discontinued the tax in September and instead, the IPPs now have to make a one-off payment equivalent to the windfall profit tax in a year. “We put in our proposal last month for the payments to be spread over two years instead of the current one year,” Tan told StarBiz recently. (Starbiz)
* * * * *
The government is studying the global oil price situation before fixing the minimum or ceiling price for the
commodity in view of the current price situation. Deputy Finance Minister Datuk Ahmad Husni Hanadzlah said the study would not affect the government subsidy and the fuel price would only be fixed after taking into consideration the various factors that contributed to the price fluctuation. However, if the price goes down further, the surplus from the subsidy allocation will be used for development purposes, like the RM7bn derived after the global crude oil price went down to US$70 a barrel last month. (Financial Daily)
* * * * *
The international reserves of Bank Negara Malaysia amounted to RM343.8bn as at last Friday. The reserves position is sufficient to finance 8.1 months of retained imports and is 3.7 times the short-term external debt, the central bank said in a statement. (BT)
* * * * *
Malaysia’s inflation rate, as measured by the consumer price index (CPI), rose 7.6% in October, down from 8.2% in September, according to data from the Statistics Department. The decline followed a series of cuts in fuel prices since June. (Starbiz)
* * * * *
Malaysian crude palm oil (CPO) exporters are in a quandary as the global financial crisis and the plunge in CPO prices have made it difficult for foreign importers to obtain letters of credit (LCs). Industry players said that prices of CPO quoted in contracts or LCs were much higher than the current market price of the commodity, making foreign banks in importing countries more cautious about extending credit facilities. Mohd Radwan Alami, the group chief executive of Alami Vegetable Oil Products Sdn Bhd, a palm oil trading company, said many importers had opted to default on their contracts as the price of CPO had dropped sharply. (Starbiz)
* * * * *
Foreign currency deposits or accounts in the country have increased after the exchange rates of several currencies dropped about 30% or more against the ringgit over the last few months, according to senior banking officials. More liberal forex regulations had also boosted foreign currency deposits, they said. According to HSBC Bank Malaysia Bhd personal financial services general manager, Lim Eng Seong, the currencies that were sought after included the US dollar, pound sterling, Australian dollar and the euro. (Starbiz)
* * * * *
Local producers of flat steel products have been urged to re-adjust their prices downward promptly, emulating recent moves by their international counterparts. Baoshan Iron & Steel Co, China’s biggest steelmaker, has slashed prices for three straight months. On Thursday, the company cut its cold-rolled product prices for December by 22% – the biggest cut this year – as the economic slowdown dampens demand from carmakers and builders. Locally, the sole hot-rolled coils (HRC) producer is Lion Group unit, Mega Steel Sdn Bhd, while cold-rolled coils (CRC) producers include Mega Steel, Mycron Steel Bhd, CSC Steel Holdings Bhd and Yung Kong Galvanizing Industries Bhd. Malaysia Iron and Steel Industries Federation
president Chow Chong Long said local HRC and CRC makers should consider adjusting their prices, given the price cuts by major overseas steel players. (Starbiz)
* * * * *
Two more foreign Islamic fund managers have obtained licenses to operate in Malaysia as the country gears up to be a global centre for Islamic fund management activities, says Deputy Prime Minister Datuk Seri Najib Tun Razak. The Securities Commission has approved India’s Reliance Asset Management and Kuwait-based Global Investment House, and is currently reviewing applications made by other foreign financial institutions. (BT)
* * * * *
Stocks stormed higher Friday as President-elect Barack Obama appeared likely to nominate New York Federal Reserve president Timothy Geithner as the next treasury secretary and hand him the herculean task of righting the US financial system, whereby the DJIA gained 494 points, or 6.5% to close at 8,046.4 pts. The S&P 500 index jumped 6.3% (+47.59pts, close 800.0) and the Nasdaq composite advanced 5.2% (+68.23 pts, close 1,384.4). US light crude oil for Jan delivery rose 51 cents to settle at US$49.93 a barrel on the New York Mercantile Exchange. (AP)
* * * * *
The U.S. recession probably deepened as consumer spending plunged in October by the most since the 2001 downturn and businesses slashed investment, government reports may show this week. Purchases declined 1% after a 0.3% drop the prior month, according to the median estimate of economists surveyed by Bloomberg News ahead of Commerce Department figures due Nov. 26. Commerce may also report the same day that orders for long-lasting goods fell for the second time in three months. (Bloomberg)
* * * * *
Bank of Japan Governor Masaaki Shirakawa indicated that the central bank wants to avoid cutting interest rates to zero and will instead focus on pumping cash into the financial system to buoy the economy. “An additional rate cut would have many adverse effects on the functioning of the money market,” Shirakawa told reporters after his policy board left the benchmark rate at 0.3 percent yesterday, three weeks after the first reduction in seven years. Shirakawa instructed his staff to study new ways of making money available for lending, such as accepting corporate debt as collateral, on concern that businesses are struggling to obtain funds. The bank could be forced to follow the Federal Reserve and the European Central Bank in trimming borrowing costs anyway, should the global financial turmoil prolong Japan’s recession. (Bloomberg)
* * * * *
Canadian Finance Minister Jim Flaherty said the nation’s economy may have entered a recession, joining the rest of the members of the Group of Seven industrialized nations. He said its quite possible that Canada will be below the line slightly in 4Q08 and 1Q09, which technically would be a recession. The world’s eighth-largest economy is weighed down by slumping shipments of automobiles to the US, and lower prices for exported commodities such as oil and wheat. (Bloomberg)
* * * * *
Congress will send President-elect Barack Obama an economic stimulus package the day he takes office Jan 20, two Democratic lawmakers said yesterday. According to Senator Charles Schumer of New York, the package will be between US$500bn and US$700bn. Obama’s stimulus plan involves an infusion of cash for middle-class tax cuts, rebuilding roads, bridges and schools, building broadband Internet access and investing in clean energy. (Bloomberg)
* * * * *
Saudi Arabia’s central bank cut its key interest rate and reduced the level of reserves commercial banks are required to hold, to encourage more lending to companies struggling to find credit. The bank cut the repo rate by 1% point to 3% and the reserve requirement to 7% from 10%, according to its website. The measures are aimed at “ensuring that adequate system liquidity is available to meet steady domestic demand,” it said. The rate cut is Saudi Arabia’s second in a month, and follows similar steps across the Persian Gulf to avert a liquidity crisis as foreign investors pull money out of the region and banks curtailed lending to each other. Saudi companies that previously borrowed abroad are now relying on local banks, which may struggle to maintain lending. (Bloomberg)
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November 21, 2008 Daily Highlights 24 November 2008 Property : Is the property market resilient?

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