18 December 2008 Newz Bits

December 19, 2008 at 7:39 am Leave a comment

TALKING POINT

Earnings and dividend shocker from Gamuda’s 1QFY09 results
1QFY09 net profit of RM55.0m was significantly below house and market expectations due to margin compression and slow work progress in the double tracking project, which will see its
completion pushed back by another year. We are also surprised by further margin compressions despite the easing of building materials prices since July 2008. We suspect this to be due to a
kitchen sinking exercise and margins may recover strongly post- FY2009. An interim dividend of 4 sen gross has been declared, a sharp cut from 12.5 sen in 1QFY08. Despite our slashing of
earnings estimates for FY09 and FY10 by 38.4% and 42.5% respectively, we maintain our BUY call as the stock continues to remain undervalued. Target price has however been reduced to
RM2.28 from RM2.74.

HIGHLIGHTS

On Malaysia
· Tenaga taking a stake in undersea cable, not Bakun dam
· Federal government to assume RM15bn water assets loans
On The Global Front
· U.S. current account deficit narrowed more than forecast
· China will reduce tax on home sales to boost property market
REPORTS
· Gamuda – 1QFY09 Results (Buy; RM1.86; TP: RM2.28)

Tenaga Nasional Bhd (TNB MK, Buy, TP: RM8.20) is not taking up any equity stake in the 2,400 megawatt Bakun hydroelectricity dam but will acquire an interest via a consortium to undertake the RM9bn undersea cable project instead, said Minister in Prime Minister’s Department Tan Sri Amirsham Aziz. The minister in charge of the Economic Planning Unit said Tenaga has expressed it would want to operate the dam without having any equity participation in it. (Financial Daily)
* * * * *
Sime Darby Bhd (SIME MK, Buy, TP: RM7.30) has expressed its interest to the government to buy a stake in IJN Holdings Sdn Bhd, operator of Malaysia’s top heart hospital. It is still waiting for the government’s response. Sime was replying to a query from Bursa Malaysia following a report that it was interested in IJN. Such a deal will be subject to satisfactory due diligence and approval by relevant authorities, Sime said in a statement to Bursa Malaysia. (BT)
* * * * *
MMC Corporation Bhd’s subsidiary has issued a notice of arbitration to start arbitration proceedings against Wayss & Freytag (Malaysia) Sdn Bhd over a contract dispute involving the SMART tunnel. The subsidiary MMC Engineering Group Bhd and Gamuda Bhd (GAM MK, Buy, TP: RM2.28) are the joint venture partners of MMCEG-Gamuda Bhd Joint Venture, which is involved in the legal dispute with Wayss & Freytag. MMC said as advised by the JV’s solicitors, the company was of the view that the JV had a good chance of succeeding in its claims against Wayss & Freytag before the arbitral tribunal. (Starbiz)
* * * * *
A blanket freeze on foreign workers will only paralyse certain sectors of the country’s economy, the Malaysian Employers Federation (MEF) said yesterday. Instead, the government should be selective in such a move as the plantation, construction and agriculture sectors depended greatly on foreign labour, reasoned MEF executive director Shamsuddin Bardan. In an interview with Bernama, he said that almost 60% of the 150,000 workers in the plantation sector were foreigners while the construction and agriculture sectors had 80% and 50% migrant workforce, respectively. He also said that Malaysians were generally not keen to work in these sectors as they considered such jobs lowly paid. (Financial Daily)
* * * * *
The federal government is expected to assume some RM15bn worth of loans under its planned acquisition of state and private water assets in Peninsular Malaysia. The amount involves some RM7.9bn owed by state governments to the federal authorities, and another RM7bn worth of bonds issued by private water concession holders. Melaka got the ball rolling, with the signing of the agreement to transfer RM889m worth of water assets to the federal authorities, and in return, the state was relieved of its RM770m worth of loans. As the value of assets exceeds the loan, the differential sum of RM119m will be channelled back to the state. Pengurusan Aset Air Berhad expects to take over water assets from a private concessionaire in Johor by next month, while approvals for similar acquisitions have been received from the state governments for Negeri
Sembilan, Pahang and Kelantan. (Financial Daily & BT)
* * * * *
The Government is likely to introduce a strategic package to combat the impact of the global economic downturn for the medium to long term, according to Minister in the Prime Minister’s Department Tan Sri Amirsham A. Aziz. Amirsham said the Government would need to assess the impact of the RM7bn stimulus package first which it deemed as a short-term measure to prop up the economy. (Starbiz)
* * * * *
Stocks ended lower Wednesday as investors tried to shrug off a bigger-than-expected loss from investment bank Morgan Stanley, but an afternoon rally failed to hold traction. The DJIA lost 99.8 points, or 1.1% to close at 8,824.3. The S&P 500 index lost 1.0% (-8.8 pts, close 904.4) and the Nasdaq composite shed 0.7% (-10.6 pts, close 1,579.3). In currency trading, the dollar
weakened against the euro and fell to a 13-year low against the yen. US light crude oil for January delivery fell US$3.54 to settle at US$40.06 a barrel on the New York Mercantile Exchange, despite OPEC announcing it will cut oil production by 2.2m barrels a day as of January 1 to boost oil prices. (CNNMoney)
* * * * *
The U.S. current account deficit narrowed more than forecast in 3Q08 to US$174.1bn, reflecting gains in exports and decreases in foreign earnings on American assets. The shortfall, the broadest measure of trade because it includes transfer payments and investment income, was the smallest since 3Q07 and followed a revised US$180.9bn gap in 2Q08, the Commerce Department said yesterday. The slump in oil prices indicates the value of imported goods will drop in coming
months, signalling the deficit is likely to keep shrinking. In addition, the spreading global economic slowdown makes US assets relatively more attractive, easing concern that a ballooning federal budget gap will eclipse the trade account as a concern for overseas investors. (Bloomberg)
* * * * *
Europe’s inflation rate fell the most in almost two decades last month as oil prices plunged, giving the European Central Bank more leeway to cut interest rates. The inflation rate in the euro area declined to 2.1% from 3.2% in October, the biggest drop since at least 1991, the European Union statistics office said yesterday. ECB President Jean-Claude Trichet said Wednesday there is a limit to how far the bank can cut interest rates even as economic growth slumps and inflation cools.
Trichet signalled the ECB may pause in January after making a record cut of 75 basis points this month. ECB council member Axel Weber has said he “would like to avoid” taking the rate below 2%. (Bloomberg)
* * * * *
UK unemployment rose at the fastest pace since 1991 in November and the Bank of England considered cutting interest rates to the lowest ever this month as the recession tightened its grip. The number of people receiving jobless benefits rose 75,700 to 1.07m, the highest level since July 2000, the Office for National Statistics said yesterday. UK policy makers voted unanimously to cut the benchmark rate to 2% and refrained from a bigger reduction on concern it may prompt an “excessive” drop in the pound, minutes of their decision show. (Bloomberg)
* * * * *
China will reduce a tax on home sales to stem a property-market slump that may drive the world’s fourth-biggest economy into the deepest slowdown since 1990. Sale profits, rather than prices, will now be taxed, the State Council said yesterday. Falling home sales are undermining construction and domestic consumption just as export demand collapses because of recessions in the US, Europe and Japan. Building is the biggest driver for China’s expansion, contributing a quarter of fixedasset investment and employing 77m people. The levy will be waived on properties sold two years after purchase, down from five years, the State Council said. The new rules apply for one year, it added, without saying when they take effect. (Bloomberg)
* * * * *
Hong Kong’s central bank lowered its base rate to a record low 0.5% and asked lenders to follow suit to help prop up the city’s faltering economy. The reduction from 1.5% by the Hong Kong Monetary Authority (HKMA) came after the US Federal Reserve cut its benchmark interest rate to as low as zero. According to Fitch Ratings, lower borrowing costs are unlikely to stimulate spending and cushion Hong Kong’s economy because banks scarred by writedowns and credit losses remain reluctant to lend. (Starbiz)
* * * * *
Opec oil ministers agreed their deepest production cut ever yesterday, slashing 2.2 million barrels per day from oil markets in a race to balance supply with rapidly crumbling demand for fuel. The 12 members of the Organisation of the Petroleum Exporting Countries were also aiming to build a floor under prices that have fallen more than US$100 (RM353) from a July peak above US $147 a barrel. The cut, effective from January 1, comes on top of existing reductions of 2 million bpd agreed by Opec at its last two meetings. It lowers the group’s supply target to 24.845 million bpd. (Reuters)
* * * * *

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December 17, 2008 Daily Highlights Gamuda 1QFY09 : Earnings and dividend shocker

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