3 December 2008 Newz Bits

December 10, 2008 at 3:13 am Leave a comment

TALKING POINT

YTL Power acquires PowerSeraya from Temasek
YTL Power (YTLP MK, Buy, TP: RM2.93) has made a move to acquire Singapore’s second largest power generator PowerSeraya from Temasek for S$3.4bn cash, and the assumption of S$0.2bn
debt. The move comes as a surprise as Temasek had reportedly shelved the asset sale plan last week in view of the global economic crisis. The purchase will be partly funded by cash of S$1.15bn (RM2.74bn), with the rest by debt extended by DBS Bank Ltd. Net of additional interest payments, PowerSeraya’s preliminary full-year contribution will be about RM198m in net
earnings to YTL Power’s bottom-line. We are maintaining our target price of RM2.93 however, while our BUY call is reiterated.

HIGHLIGHTS

On Malaysia
• Moody’s cuts IOI Corp’s credit rating
• Petrol and diesel prices at the pump are down 10 sen today
On The Global Front
• U.S. House to push US$500bn stimulus bill
• Bank of Japan unveils ¥3trn move to ease funding strains
• Australia cuts benchmark rate by 1%, biggest cut since 1991
REPORTS
• YTL Power Int – YTL Power buys Singapore’s PowerSeraya
(Buy; RM1.93; TP: RM2.93)

IOI Corp (IOI MK, Buy, TP: RM4.00) had its credit rating cut by Moody’s Investors Services, which said the company’s share buyback and “hefty” capital distributions have increased its debt. “This has reduced its buffer against the challenges presented by weakened palm-oil and property markets,” Moody’s said in a statement yesterday. Moody’s cut IOI’s rating to “Baa1” from “A3”, affecting about US$500m (RM1.8bn) of bonds and US$225m (RM819m) of loans, it said. The
ratings outlook is stable on the basis that IOI will continue to exercise prudence in managing its currency derivative transactions to hedge its currency risk. (BT)
* * * * *
Celcom (Malaysia) Bhd, a subsidiary of TM International (TI MK, Buy, TP: RM5.95), believes it has what it takes to conquer the international direct dial (IDD) market, thanks to its newly launched prepaid plan. Based on unofficial numbers provided by Celcom, the IDD market in Malaysia is believed to be worth about RM2bn a year, of which 80% are calls to Indonesia. Celcom chief executive officer Datuk Seri Shazalli Ramly said Celcom is currently the smallest player in the IDD market with about 20% market share, while DiGi (DIGI MK, Hold, TP: RM25.50) has the highest. The new plan, Prabayar Celcom Sukses is specifically designed for Indonesian workers in Malaysia. It allows them to call friends and family for as low as 35 sen a minute, but not more than 58 sen a minute. According to Maxis Hotlink and DiGi websites, a Hotlink or DiGi user calling a mobile user in Indonesia will be charged 71 sen a minute, while calls to a fixed-line number in Indonesia will cost the Hotlink or DiGi user 39 sen a minute. (BT)
* * * * *
Supermax Corp Bhd expects its prospect to remain bright as demand for rubber gloves remains intact despite the uncertainties in the global economy. Its executive chairman/group managing director, Datuk Seri Stanley Thai, said world demand for rubber gloves is expected to grow steadily at 10-12 per cent a year. He said the fall in latex prices and strengthening of the US dollar would help the company improve its bottomline. For the third quarter ended September 30,
2008, Supermax’s pre-tax profit rose 9.5% to RM15.896m from RM14.513m in the same quarter last year. (Bernama)
* * * * *
Astro All Asia Networks plc’s appeal against Indonesia’s Competition Supervisory Commission’s (KPPU) ruling that it had breached competition laws there has been dismissed by the Central Jakarta District Court. In a statement yesterday, Astro said it intended to appeal the decision at the Supreme Court. The ruling was a result of KPPU’s investigation into Astro due to complaints from competitors in respect of the management and distribution of broadcast rights to Barclays
Premier League (BPL) in Indonesia. (Financial Daily)
* * * * *
The East Coast Economic Region (ECER) is set to woo RM112bn worth of investments in the next 12 years between 2008 and 2020, Prime Minister Datuk Seri Abdullah Ahmad Badawi said Tuesday. He said the bulk of the investments or 47% of the funds would come from the private sectors from within and outside the country. “The ECER’s importance to the east coast states residents is indeed very clear. As a people-friendly socio-economic programme, the ECER’s cherished goal is to transform Pahang, Kelantan and Terengganu into a developed region by 2020,” he added. (Bernama)
* * * * *
Petrol and diesel prices at the pump are down 10 sen today, with RON97 petrol at RM1.90 a litre and RON92 petrol and diesel at RM1.80. This is the fifth time petrol and diesel prices are been cut since retail prices hit a high of RM2.70 a litre in June. (The Star)
* * * * *
Environmental concerns have caused HSBC to scale back lending to forestry schemes in Malaysia and Indonesia and review links with Canadian oil sands, the British company told Reuters. HSBC will cut ties with a third of forestry clients in Malaysia and Indonesia, including palm oil, soy and timber, said Francis Sullivan, the bank’s adviser on the environment. The bank was criticised recently by a development group, the Forest Peoples Programme, for not disclosing the names of its palm oil banking clients. (BT)
* * * * *
Wall Street recharged the rally Tuesday afternoon at the end of a volatile session as investors welcomed signs that the automakers might get a bailout after all. The DJIA gained 270 points (+3.3%). The S&P 500 index added 4% (+32.6 pts, close 848.8) and the Nasdaq composite climbed 3.7% (+51.7 pts, close 1,449.8). In currency trading, the dollar gained versus the yen but fell against the euro. US light crude oil for January delivery eased US$2.32 to settle at  S$46.96 a barrel on the New York Mercantile Exchange, a 3-1/2 year low. (CNNMoney)
* * * * *
The Federal Reserve extended the term of three emergency-loan programs to April 30 from January 30, aligning their expiration dates with other central bank efforts to mitigate the credit crisis. The Primary Dealer Credit Facility and Term Securities Lending Facility, created in March, and the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, begun in September, were lengthened “in light of continuing strains in financial markets,” the Fed said yesterday. The three loan facilities, part of the central bank’s efforts to cushion financial markets from the worst crisis in seven decades, had about US$304bn in loans outstanding as of last week. The Fed already authorized other programs through April for supporting the commercial paper market and money-market funds and for swapping dollars with 14 central banks. (Bloomberg)
* * * * *
US House of Representatives Speaker Nancy Pelosi met leading governors on Monday to discuss the size and shape of an economic stimulus package that one Democratic aide said was likely to cost US$500bn (RM1.8trn). The legislation would include a middle-class tax cut, billions of dollars for road, bridge and mass transit construction, expanded aid to states and investments in renewable energy. (Financial Daily)
* * * * *
The Bank of Japan (BOJ) unveiled ¥3trn (RM116.8bn) in new measures yesterday to ease an acute squeeze in corporate funding from the global financial crisis in the lead up to the end of the year. The BOJ will launch a new scheme in January under which it will lend unlimited funds to financial institutions at the overnight call rate against corporate debt as collateral. They will also start taking on triple-B rated bonds as collateral from December 9, where previously they only accepted single-A or higher rated corporate debt. However, there are currently no plans to cut interest rates down from 0.3%. (Financial Daily)
* * * * *
Australia’s central bank cut its benchmark rate by one percentage point, extending the biggest round of reductions since the nation saw last in a recession in 1991. Governor Glenn Stevens lowered the overnight cash rate to a six-year low of 4.25% in Melbourne yesterday. Stevens said the monetary policy is now “expansionary” to help restore consumer and business confidence. Three percentage points of cuts since September save borrowers an average A$250,000 (RM589,800) home loan more than A$500 a month. (Financial Daily)
* * * * *
European Union finance ministers tussled over a plan to cushion their 27-nation economy from the effects of the global recession and may need to revisit the multibillion-euro package later this month. The debate over how much fiscal stimulus EU members can afford and how it should be paid for is fuelling tensions between countries as European leaders struggle to coordinate 200bn euros (US$254bn) in stimulus measures – equivalent to 1.5% of EU economic growth – without
breaking their own budget rules. EU heads of state will discuss the package next week at a summit in Brussels. (Bloomberg)
* * * * *
Spain’s jobless ranks swelled for an eighth month in November, bringing the number of new claims in the last year to almost a million, as the country heads into its first recession in 15 years. The number of people claiming unemployment benefits rose 6.1%, or by 171,243, from the previous month to 2.99m, the Labour Ministry yesterday. Y-o-y, the number of claimants jumped 43% or by 894,796. The unemployment rate rose to 11.3% in 3Q08, the highest in the euro-region, and the European Commission forecasts that will rise to 15.5% in 2010. (Bloomberg)
* * * * *
Well-established firms such as Singapore’s Wilmar International and Jakarta-listed Astra-Agro Lestari are in a strong position to buy land from what could be forced sales by newer plantations. “These estates are takeover targets … because when you first start out in this business, money only goes in one way and that is out,” said Martin Bek-Nielson, executive director of midsized
United Plantations. “Takeover possibilities could appear if (crude) palm oil prices continue to stay at RM1,400- RM1,500 for the next half year,” he said. Sime Darby’s CEO has said the global market turmoil provided a “once in a lifetime” opportunity to acquire undervalued assets. The company has a cash pile of about US$1.5bn. Previous palm oil price slumps saw little industry consolidation as there were fewer new estates and many more plantations were better established with mature oil palms. (BT)
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