6 January 2009 Newz Bits

January 6, 2009 at 8:01 am Leave a comment

TALKING POINT

Time to take some profit on plantation counters

Much to our delight, the past few trading sessions have been a good start to the new year for plantation counters under our coverage. Share prices have been taking a cue from CPO prices and given an extended boost from positive market sentiments. Given that some of the companies have overrun its fundamental, we recommend selling IOI into strength while downgrading our
calls on Kim Loong and Boustead to a hold. We continue to reiterate our buy calls on Asiatic, Sime and TSH.

HIGHLIGHTS

On Malaysia
• Puncak Niaga enters into a MOU to bid for an Indian project
• Sime Darby obtains approval for LCCT in Labu
• Government does not plan buy back toll road concessions
• Dubai’s Meydan LLC cancels racecourse construction deal with WCT Bhd
• MAHB will go ahead with building a permanent LCCT
On The Global Front
• Obama plans US$300bn in tax cuts as part of stimulus package
• U.K. consumer confidence fell to the lowest since at least 2004 in December
REPORTS
• Plantations (Overweight) – Take a little profit

Puncak Niaga Holdings Bhd (PNH MK, Buy, TP: RM3.30) has entered into a memorandum of understanding (MoU) with India’s Lanco Infratech Ltd to jointly participate in an international bidding called by the Commissioner of Municipal Corporation of Kalyan Dombivli, India. Puncak did not say what the project entailed, but mentioned that it would hold a 20% interest in the project if the bid is successful. (Financial Daily)
Thoughts: The move comes on the back of its recent expansion into China, as the Group looks to diversify away its earnings base away from Malaysia. All eyes are now keenly on the water sector consolidation in which Puncak Niaga is a key player given its 40%-ownership of treatment capacity and 70%-ownership of the distribution arm. Vastly divergent valuations appear to be the stumbling block, which is not a surprise, but presents trading opportunities until the issues are resolved. We re-iterate our BUY call on the stock.
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Sime Darby Bhd (SIME MK, Buy, TP: RM6.40) has obtained the government’s approval to proceed with its proposed LCCT in Labu, Negri Sembilan – a venture in collaboration with Air Asia Bhd (AIRA MK, Buy, TP: RM1.90). Sime Darby told Bursa Malaysia yesterday that the RM1.6bn LCCT project was an integral part of the development plan for its Negri Sembilan Vision City (NSVC). The company added that the NSVC was part of its Central Vision Valley (CVV) property development project spanning parts of Selangor and Negri Sembilan. Sime is expected to take a majority stake in the project with Air Asia as the operator. (Financial Daily)
Thoughts: It will be interesting to observe the continuing saga between Sime Darby and Malaysia Airports Holdings in building the new LCCT, which the former has obtained approval for but at a different location while the latter is still awaiting approval for but at the same location. We can’t see how the government will give its approval for the building of two LCCTs in the same vicinity. On a separate note however, Sime has been a recent laggard in the run-up of plantation-related counters and we see no reason why it should and suggest further accumulations at current levels. Our BUY call is re-iterated.
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Malaysia Airports Holdings Bhd (MAHB) will go ahead with its plan to build a permanent low-cost carrier terminal (LCCT) under the National Airport Master Plan, which maps out the development of all the airports in the country except Senai Airport, which is privately owned. Pending the government’s approval, the first phase of this project could be ready by the end of 2011 and could be built at a reasonable cost due to the availability of existing infrastructure, MAHB said in a statement released to Bursa Malaysia yesterday. Under the plan, the existing Express Rail Link would be extended for another 1.5km to connect the new LCCT to the existing main terminal. (BT)
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A source close to YTL Power International Bhd (YTLP MK, Buy, TP: RM2.93) said the proposal it submitted to the government last year could help boost the slowing economy and create jobs. YTL Power has proposed to invest almost RM4bn, assuming it can build a new 1,200-megawatt plant, to replace its ageing plants. The source explained that the proposal was not to double YTL Power’s capacity but rather for the group to maintain its current generation size. The new plant, to be built at no cost to Tenaga Nasional Bhd (TNB), would use 20% less gas. (BT)
* * * * *
Proton Holdings Bhd will emphasise on replacement models for popular models to gain market share, said new chairman Datuk Mohd Nadzmi Mohd Salleh. He stressed Proton must focus on producing new models for its bread and butter or popular models rather than many different models to retain its existing customer base and grow market share. He is targeting a 30% domestic market share. In addition, Nadzmi also supports collaboration with other automakers to produce new models. (StarBiz)
* * * * *
Malaysia’s exports are expected to post their biggest annual fall in more than 6½ years in November, rocked by falling demand for manufactured items and sliding oil prices, according to a Reuters poll. November exports are predicted to fall 6% from a year earlier, according to the median of a poll of 11 economists, compared to a 2.6% contraction in October when they fell for the first time since July 2007. It would be the largest decline since February 2002, when they slumped 15.6%. (Financial Daily)
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The government does not plan to buy back the concessions for tolled roads, Works Minister Datuk Mohammed Zin Mohammed said, although the contracts have a provision for it to do so. He was responding to a call for the concessions to be nationalised, after 17 toll agreements were made public yesterday. (Financial Daily)
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Dubai’s Meydan LLC has cancelled a racecourse construction deal with WCT Bhd and local firm Arabtec. A Meydan statement did not give a value for the deal, but WCT said in 2007 that its 50-50 joint venture with Arabtec had won a US$1.3bn contract to build the racecourse in Dubai. The contract was cancelled “because of non-adherence to the agreed time schedule for construction,” Meydan said in the statement. Meydan is taking steps to commission other companies to complete the racecourse by 2010, when it is to be opened with the Dubai World Cup horse race, the statement said. (BT)
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KFC Holdings (Malaysia) Bhd became a subsidiary of QSR Brands Bhd when the latter raised its stake by another 1.62% in the fast-food group to 50.25%. The purchase, done with internal funds, will allow QSR shareholders to have greater participation in KFCH. (BT)
* * * * *
Janakuasa Sdn Bhd, which is ultimately held by the major owners of a Perlis power plant, has won government approval to build a US$1.5bn (RM5.22bn) power plant in Vietnam. It will fully own the proposed 1,200 megawatts (MW) coal-fired power plant, which will be located in the southern province of Tra Vinh. In a statement yesterday, the independent power producer said construction of Duyen Hai 2 will start in 2011. Upon completion in 2014 or 2015, the power plant will deliver all electricity for sale. However, it did not mention details of a power purchase agreement. (BT)
* * * * *
Malaysian exporters can continue to export synthetic gloves to the US without any restriction, said Malaysian Rubber Glove Manufacturers Association (Margma). In a statement, the association said the US International Trade Commission (ITC) had on December 22 2008 confirmed the ruling made by the Administrative Law Judge and decided there has been no
violation of the law and the investigation has been terminated. On August 25 last year, ITC issued an initial finding saying a patent infringement claim filed by Tillotson Corp in 2007 against manufacturers and re-sellers in the US, Malaysia, Indonesia and China, was invalid. (BT)
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Stocks fell Monday, retreating after last week’s big rally, as investors digested President-elect Barack Obama’s stimulus plan, monthly auto sales and surging oil prices. The DJIA lost 81.8 points (-0.9%, close 8,952.9). The S&P 500 shed 0.5% (-4.4 pts, close 927.5) and the Nasdaq composite slid 0.3% (-4.2 pts, close 1,628.0). In currency trading, the dollar gained versus the euro and the yen. US light crude oil for February delivery rose US$2.47 to settle at US$48.81 a barrel on the New York Mercantile Exchange. (CNNMoney)
* * * * *
President-elect Barack Obama’s economic stimulus package will include hundreds of billions of dollars worth of tax breaks for individuals and businesses, according to a transition official and Democratic aides. Obama is asking that tax cuts make up 40% of a stimulus package. The measure may be worth as much as US$775bn, according to a Democratic aide, meaning tax cuts may constitute more than US$300bn of the legislation. Making tax cuts such a large part of the stimulus may help win support from congressional Republicans. The change would come by altering tax-withholding rules, rather than through a rebate check as with the previous stimulus plan enacted last year, so that workers would see an immediate increase in their take-home pay. (Bloomberg)
* * * * *
U.K. consumer confidence fell to the lowest since at least 2004 in December as the recession deepened and unemployment rose, Nationwide Building Society said. An index of sentiment fell four points from a month earlier to 47, the worst since the survey began four years ago, the mortgage lender said in a statement today. The reading, taken from a survey of 1,000 people between Nov. 17 and Dec. 14, compares with 84 points a year earlier. The U.K. central bank will probably cut the benchmark interest rate by a half point to 1.5% on Jan. 8, according to the median forecast of 57 economists in a Bloomberg News survey. (Bloomberg)
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U.S. auto sales plunged 36% in December, dragging the industry’s annual volume to a 16-year low as the recession ravaged demand. General Motors Corp. sold the fewest vehicles in its home market since 1959. Toyota Motor Corp. and Honda Motor Co. posted their first drop in full-year U.S. sales since the mid-1990s after December declines of at least 35%. Chrysler LLC’s 53% dive last month paced major automakers, while Ford Motor Co. slumped 32% and GM and Nissan Motor Co. fell 31%. The federal rescue of GM and Chrysler on December 19 could not overcome buyer pessimism and tight credit in the world’s biggest auto market. GM’s 2008 U.S. total of 2.95m light vehicles was its smallest in 49 years, and Ford’s tally sagged to a 47-year low, according to trade publication Automotive News. (Bloomberg)
* * * * *
Spain’s inflation rate fell to its lowest in almost a decade in December as oil prices slid from a July peak and weak demand encouraged retailers to cut prices. Consumer prices gained 1.5% y-o-y, using the European Union’s calculation method, compared with 2.4% in November, the Madrid-based National Statistics Institute said yesterday in an initial estimate. That was the lowest since January 1999 and compares with a median forecast of 1.8% in a Bloomberg News survey of six economists. The combination of the credit crunch and the collapse of a construction boom have pushed Spain into its first recession since 1993. With the global slowdown stoking concern about deflation across the world economy and crude oil prices 68% below their July peak, the European Central Bank has room to cut interest rates. (Bloomberg)
* * * * *
Australian demand for services shrank for a ninth month in December, adding to signs the economy may stagnate this year. The performance of services index rose 1.5 points to 39.3 from November, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. A reading below 50 indicates the sector is contracting. Increasing evidence that the economy may stall in 2009 may prompt Reserve Bank of Australia Governor Glenn Stevens to add to the most aggressive round of interest-rate cuts since 1992 when he next reviews the benchmark interest rate on February 3. (Bloomberg)
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Mirror Mirror On The Wall…. | Market Strategy Plantation – Take a little profit

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