17 December 2008 Newz Bits

December 17, 2008 at 2:24 am Leave a comment

TALKING POINT

Gamuda issues profit warning
Gamuda issued a profit warning yesterday following its annual general meeting. Earnings for FY2009 will be lower than FY2008 due to delays in land sales in Yen So Park, Hanoi as well as
delays in the Ipoh – Padang Besar double track project owing to land acquisition issues. Dividends may also be lower than the 25 sen (gross) per share paid in FY2008. We are reviewing our earnings estimate and valuation for possible downgrades after we seek further clarification from the management at the company’s 1QFY09 results briefing this evening.

HIGHLIGHTS

On Malaysia
· MAS begins talks with various carriers to form tie-ups
· Multi-Purpose will acquire non-gaming assets of Magnum for RM550m
· Proton sued for RM520m for breach of contract
On The Global Front
· Federal Reserve cuts interest rate from 1% to 0.25%
· Europe’s manufacturing and service industries contract at the fastest pace in at least a decade
REPORTS
· Gamuda – Profit warning (Buy; RM1.82; TP: RM2.74)

Sime Darby Bhd (SIME MK, Buy, TP: RM7.30) has expressed interest in taking over the National Heart Institute (IJN), a move that has met with objections from the Ministry of Health, sources said. It is learnt that the Ministry of Finance (MoF), which owns IJN, has submitted a proposal for the privatisation of the hospital to the cabinet. Health industry officials are not surprised by the move as the ministry has sent out feelers to government-linked companies to gauge the interest in such an exercise. Sources said that both Health Minister Datuk Seri Liow Tiong Lai and his deputy Datuk Dr Abdul Latiff Ahmad do not agree to the proposed divestment. (Financial Daily)
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Malaysian Airline System Bhd (MAS MK, Hold, TP: under review) said yesterday it has begun talks with various carriers including Australia’s Qantas to form tie-ups, including joint ventures, as carriers face a tough economic environment. Managing director and CEO Datuk Seri Idris Jala said that while MAS would pursue strategic partnerships, the Government would have the final say. (StarBiz)
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Multi-Purpose Holdings Bhd (MPHB) will acquire the non-gaming assets of Magnum Corp Sdn Bhd for a purchase price of RM550m. In a three-step corporate exercise, MPHB will buy Magnum’s non-gaming assets, keeping commercial properties or land bank in strategic locations in Kuala Lumpur. It will then sell the assets it does not want to Lawrence Lim Swee Lin, a director of Magnum. The board of directors of Magnum Holdings, a joint-venture company established by Magnum Corp and Asia 4D Holdings Ltd, intends to reorganise and transfer the remaining non-gaming assets of the Magnum group to Magnum Holdings’ special-purpose vehicles for onward disposal. (StarBiz)
* * * * *
Firefly, the country’s community airline, has completely removed fuel surcharge for all its destinations, both domestic and international, yesterday. Managing director Eddy Leong said the removal of fuel surcharge is in line with the recent drop in global oil prices. The airline had previously charged RM27 in fuel surcharges for domestic flights while the charge for international routes varied depending on the location. For its “un-fare” programme, Firefly will offer deals from today that allow people to buy a ticket from as low as RM35 for one-way trip. “All inclusive, no extra charges but the public is advised to make bookings at least 21 days ahead,” Leong said. During the off peak season, the airline will be offering its lowest fares with discount of up to 80% or even zero fare, he said. It will also offer attractive and value-for-money packages during the high peak season such as festive seasons, and school and year-end holidays, he added. The average load factor for the airline is at around 70%. (BT)
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The government may open up the education, healthcare, tourism and construction industries to help lure foreign investments, International Trade and Industry Minister Tan Sri Muhyiddin Yassin said yesterday. “We have identified some sectors that can be competitive and we will study these sectors to see how we can open them up,” he told reporters in Singapore yesterday. The government will set up a cabinet committee to study the effects of liberalisation in its  ace-based policies, Muhyiddin said. Malaysia may attract RM60bn in foreign direct investment this year, up from RM56bn in 2007, the minister said. There is “foreign interest” in the country’s service industries, he added. (Financial Daily)
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Proton Holdings Bhd is being sued for alleged breach of contract by its former Chinese joint-venture partner, Goldstar Heavy Industrial Co Ltd. Goldstar is seeking about one billion yuan (RM520m) in compensation from the lawsuit. Under the joint venture that was then proposed, a plant was to be set up in Humen of Dongguan. Proton said in a statement to StarBiz yesterday that Goldstar failed to obtain a licence for the joint venture, frustrating Proton’s initiatives to start manufacturing cars in China. Later, Proton inked an agreement to instead partner another Chinese company, Jinhua Youngman Automobile Manufacturing Co Ltd. Under this partnership, the target is to sell 30,000 units of Proton’s GEN.2, rebranded as the EuropeStar, in China. (StarBiz)
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Stocks surged Tuesday after the Federal Reserve cut a key short-term interest rate to the lowest level on record, and signalled it had more tools available to help the economy as the recession stretches on. The DJIA added 359.6 points, or 4.2% to close at 8,924.1. The S&P 500 index rose 5.1% (+44.6 pts, close 913.2) and the Nasdaq composite gained 5.4% (+81.6 pts, close 1,589.9). In currency trading, the dollar fell to an 8-week low versus the euro and hovered near a 13-year low against the yen. US light crude oil for January delivery fell US$0.91 to settle at US$43.60 a barrel on the New York Mercantile Exchange. (CNNMoney)
* * * * *
The Federal Reserve for the first time cut the main US interest rate to a range of between zero and 0.25%, from 1%, and shifted its focus to the amount and type of debt it buys, seeking to revive credit and end the longest slump in a quarter-century. According to the Federal Open Market Committee, the Fed will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. It also said weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time. In a related move, the Fed lowered the rate on direct loans to banks and securities dealers to 0.5%. It set the payment on the reserves that commercial banks hold at the Fed at 0.25%, down from 1%. (Bloomberg)
* * * * *
The Federal Reserve is open to the idea of buying lower-rated securities to ease the credit crunch, and plans to discuss possible strategies with President-elect Barack Obama’s Treasury. Because the Fed must lend only against good collateral, the Treasury would need to take the credit risk of assets that are rated below AAA, a senior Fed official said yesterday. Fed officials shifted to using the size and composition of the central bank’s assets as the main tool of monetary policy after cutting the benchmark interest rate as low as zero. The senior official said that policy makers will make decisions on new lending programs or expanding existing ones based on how housing markets and the overall economy evolve. The official said that the central bank will collaborate through the Federal Open Market Committee on policy decisions that grow the central bank’s balance sheet. (Bloomberg)
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U.S. Consumer prices tumbled the most on record in November, and builders broke ground on the fewest new homes in at least half a century, as a deepening economic contraction raised the risk of deflation. The cost of living dropped 1.7% last month, more than economists had forecast, according to a Labour Department report. Excluding food and energy, socalled core prices were unchanged m-o-m. Housing starts last month fell 18.9% to an annual rate of 625,000, the Commerce Department said. The figures helped cement the case for the Federal Reserve to lower its key interest-rate target to a record low yesterday and signal willingness to use all “available tools” to restore growth and avert a depression. (Bloomberg)
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Europe’s manufacturing and service industries contracted in December at the fastest pace in at least a decade, signalling the economy is falling deeper into a recession. A composite index of both industries dropped to 38.3, the lowest since the survey began in 1998, from 38.9 in November. The index is based on a survey of purchasing managers by Markit Economics in London and a reading below 50 indicates contraction. A separate report showed euro-area payrolls fell in the third quarter for the first time in more than four years. The deterioration may add to pressure on the European Central Bank to cut its key interest rate again next month amid indications that ECB officials are divided over how much further to ease monetary policy and when. The central bank has cut rates by 175 basis points to 2.5% since early October to buffer the
economy from the impact of the global financial crisis. (Bloomberg)
* * * * *
China’s capital spending rose close to 27% in the first 11 months of 2008, slowing from the first 10 months, rounding off a batch of data that has pointed to an abrupt slowdown in the economy. Its trade surplus swelled to a record in November, but exports and imports unexpectedly shrank, industrial output hit its weakest pace in years and sluggish demand globally and domestically pushed inflation down sharply, raising the risk of deflation. The head of the International Monetary Fund, Dominique Strauss-Kahn, forecast on Monday that economic growth could slump to around 5% next year, well below the 8% that the government is targeting. Beijing has acknowledged that the global downturn will cause unemployment to soar and could jeopardise social stability. (Reuters)
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Gamuda – Profit warning December 17, 2008 Daily Highlights

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