15 December 2008 Newz Bits

December 15, 2008 at 6:54 am Leave a comment

TALKING POINT

TM International better off privatized?
TMI’s current share price of RM3.48 is near its all-time low of RM3.12 since its demerger with TM in April. From a reference price of RM7.85, TMI has since fallen 56%. The issues facing TMI bear a similar resemblance to those of Maxis when it was taken private by Binariang. This brings us to the question of whether is TMI better off privatised? Faced with high capex requirements, a heavy debt burden (gross debt /equity ratio has almost doubled since end FY07 from 0.9x to 1.5x) amid depressed stock price levels, this may be an opportune time for Khazanah to take TMI private with the view of re-listing later when earnings are more stable. We maintain our BUY call on TMI with an unchanged target price of RM5.95 based on sum-of-parts valuation.

HIGHLIGHTS

On Malaysia
· Tenaga and Sarawak Energy likely to lease Bakun Dam
· Property market will take 3 years to recover

On The Global Front
· U.S. retail sales falls for a record fifth consecutive month
· China aims to increase its money supply by 17% in 2009
REPORTS
· TM International – Better off privatized? (Buy; RM3.48; TP: RM5.95)
· UMW Holdings – Expands suite of O&G services (Hold; RM4.88; TP: RM5.30)
· Berjaya Sports Toto – 2QFY09 Results (Buy; RM4.54; TP: RM5.60)

Tenaga Nasional Bhd (TNB MK. Buy, TP: RM8.20) and Sarawak Energy Bhd are likely to lease the 2,400MV Bakun Hydroelectric Dam from Ministry of Finance-owned Sarawak Hidro Sdn Bhd. The option to lease the dam is seen as the best in the current economic environment as it would not burden the companies financially. The ministry is also expected to take the lead in the high voltage undersea cable project – which will link Bakun to the peninsular – with a 40% stake in it.
Tenaga and Sarawak Energy will take 30% each in the RM9bn project (The Edge).
* * * * *
TM International Sdn Bhd’s (TI MK, Buy, TP: RM5.95) 70% owned TM International Bangladesh’s (TMIB) mobile network has picked Ericsson as its spare parts management services (SPMS) provider. The deal marks Ericsson’s first SPMS contract in Bangladesh, and will help boost operational efficiencies, revenue and network performance, said Ericsson. Under the agreement, Ericsson will provide TMIB with high-level hardware support for routine as well emergency maintenance, it said in a statement. Ericsson will also take over the responsibility of the spare parts and provide TMIB with first-line local support, enabling immediate response to customers’ needs. Ericsson’s SPMS will reduce TMIB’s investment in spare parts, helping to improve cash flow, and reduce expenditure associated with spare parts inventories. It will also help maintain high network performance, increasing revenue and reducing churn. (BT)
* * * * *
I-Bhd may sign a definitive partnership agreement with Singapore’s CapitaLand for a RM500m shopping complex early next year. The project, which forms part of i-City and will have gross lettable area of 1m square feet, is expected to be ready as scheduled by the end of 2011. Although I-Bhd’s deputy chief executive officer Lim Boon Siong declined to say who its foreign joint-venture partner is, CapitaLand Ltd on October 23 informed the Singapore stock exchange that it was in talks with IBhd. Lim expects that the earliest possible time that a deal is likely to be sealed would be early next year. (BT)
* * * * *
The retail prices for petrol and diesel are expected to drop further soon following the fall in global oil price, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad said yesterday. However he did not say by how much the price will go down and when it would be announced. (Financial Daily)
* * * * *
Work on the RM750m Legoland theme park at Bandar Nusajaya in Iskandar Malaysia will start in 2010 and the opening slated for 2013. The park, to be built in the city centre of Nusajaya, will have a 5.5m sq ft of gross floor area within the 58.679ha land dedicated for the lifestyle-theme development. Merlin Entertainment Group Ltd managing director for Legoland Parks, John Jakobsen said the theme park would create about 1,000 job opportunities in the park itself and it could reach up to 5,000 during construction period and indirectly upon completion of the project. Jakobsen said the park was expected to attract between one and two million visitors yearly. Merlin, which is controlled by Blackstone Group of New York, an investment and
advisory firm, has 70% equity in Legoland theme parks while Lego Group holds 30% stake. (StarBiz)
* * * * *
Malaysia’s property market will take three years to recover from its current slump, the slowest revival in more than two decades, reflecting the reach of the worldwide financial crisis, Regroup Associates Sdn Bhd said. Malaysia’s property market took about a year to recover from the 1997-98 Asian financial crisis, Regroup Associates managing director Allan Soo said. The rebound from the latest slump may start in 2010 and take as long as the recovery from the 1985 recession, Soo said. (BT)
* * * * *
MMC Corp Bhd appears to have limited options in the sale of a stake in Port of Tanjung Pelepas (PTP) in Johor as the government has restricted it from selling to a foreign party. The restriction means that PTP’s potential buyers are limited to local institutional funds that have deep pockets. This is despite strong interest from foreign parties that include large global shipping companies. Sources said that three funds – EPF, KWAP and Tabung Haji – are the likely buyers. KWAP and Tabung Haji have interests in ports through their shares in NCB Holdings Bhd, operator of Northport in Port Klang. PNB chief executive Tan Sri Hamad Kama Piah appeared to have ruled out a deal when he said that the fund was already participating as a shareholder of MMC. As for Khazanah, it is an unlikely buyer, people close to the agency said. (BT)
* * * * *
Stocks rose Friday, ending a choppy session higher, as investors welcomed the Treasury Department’s indication it might step in and bail out the troubled automakers after a $14 billion bill collapsed in the Senate. The Dow Jones industrial average added 0.8%. The Standard & Poor’s 500 index climbed 0.7% and the Nasdaq composite gained 2.2%. For the week, the Dow and S&P 500 ended with modest losses and the Nasdaq posted a slim gain. (CNNMoney)
* * * * *
US retail sales fell for a record fifth consecutive month in November and wholesale prices tumbled as the deepening recession pulls inflation down. The 1.8% decline in sales was smaller than forecast because discounts drew in more shoppers at department stores and electronic retailers, Commerce Department figures showed last Friday. US wholesale prices fell 2.2% led by plunging energy prices, in the fourth straight month of decline. The sharp November decline was led by energy goods, where prices fell 11.2%. (Bloomberg)
* * * * *
China aims to increase its money supply by 17% in 2009 and encourage lending to boost domestic consumption and buoy growth in the economy. M2, the broadest money supply measure, including cash and all deposits, will increase 17%, the State Council said. The government will also suspend the issue of 3-year central-bank notes and aims to increase total
financial-institution lending by 4trn yuan (US$584bn) next year. (StarBiz)
* * * * *
The Bank of Japan may cut the benchmark interest rate further to show its commitment to countering a deepening recession and market turmoil, said Toshiro Muto, a former central bank deputy governor. Muto said should the turmoil intensify, the bank may revive quantitative easing, a policy of providing more funds to the banking system while holding the key rate
close to zero. The bank adopted the measure for 5 years through March 2006. For now, policy makers should focus on measures to provide sufficient liquidity to lenders to avert a credit crunch, Muto said. (Bloomberg)
* * * * *
The Bush administration said Friday it might use taxpayer dollars set aside to bail out banks and Wall Street firms to keep troubled U.S. automakers out of bankruptcy. The move could provide an 11th-hour short-term lifeline to General Motors and Chrysler LLC, which have warned they are within weeks of running out of the cash they need to continue to operate. The defeat of a US$14bn bailout plan in the Senate late Thursday left the administration little choice but to tap the
US$700bn bailout approved by Congress in October, the Troubled Asset Relief Program or TARP. “Given the current weakened state of the U.S. economy, we will consider other options if necessary — including use of the TARP program — to prevent a collapse of troubled automakers,” White House Press Secretary Dana Perino said in a statement. “A precipitous collapse of this industry would have a severe impact on our economy.” (CNNMoney)
* * * * *
China’s economic slowdown is deepening, with overcapacity in almost all industries, and won’t bottom out until after the 1Q09, two senior officials said on Friday. Exports fell for the first time in seven years last month, imports plunged and manufacturing contracted by a record as the global recession pushed the world’s fourth-biggest economy into a slump. The slowdown will deepen before a 4trn yuan (US$585bn) stimulus package kicks in from 2Q09, Liu He, a senior economic policy official, said at a conference in Beijing. Stocks fell the most in three weeks after the cautions and the weakest retail-sales figures in nine months. The CSI 300 Index declined 4.2%. (Bloomberg)
* * * * *
Japan unveiled a US$255bn (US$1 = RM3.55) stimulus package on Friday, vowing that Asia’s largest economy would be the first nation to beat a once-in-a-century “financial tsunami”. Prime Minister Taro Aso unveiled a flurry of measures hours after another sharp selloff on Tokyo’s stock market after the collapse of a US bailout for carmakers. Aso said that the new package – which still needs approval by the divided parliament – would total 23trn yen (100 yen = RM3.92). It includes 10trn yen for measures that include loans for the growing number of workers losing temporary jobs and in tax cuts for homeowners. Another 13trn yen would consist of financial support such as possible bailouts of cash-strapped banks, in line with a new law passed earlier on Friday. The package comes on top of a 26.9trn yen stimulus which Aso unveiled in October. (BT)
* * * * *
Australia will spend A$4.7bn (A$1 = RM2.36) on a “nation-building” plan to create jobs and boost growth to counter the global economic slowdown, Prime Minister Kevin Rudd said on Friday. The funding is in addition to a A$10.4bn economic stimulus package announced in October that funnelled cash payments to families and pensioners to inject money into the economy. Rudd said some of the money would target crippling transport bottlenecks, including those at ports, which have hampered Australia’s ability to meet demand for its exports. He said the infrastructure spending, which includes A$2.5bn of new money and A$2.2bn of previous commitments that have been brought forward, could create 32,000 jobs and add between 0.25 and 0.50% to GDP. Included is a A$1.2bn boost for rail infrastructure. (BT)
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TM International Better off privatized? Banking Weekly Review: 8th – 14th December 2008

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