7 January 2009 Newz Bits

January 7, 2009 at 1:45 am Leave a comment


No safe haven in the Middle East
News of WCT Bhd’s RM4.6bn Meydan Racecourse job in Dubai being called off coming to light yesterday not only caused a 30% limit down on WCT’s share price but also sent shock waves to the construction sector and investment fraternity. This will dampen investor sentiments and cast more dark clouds over the construction sector. The cancellation of this contract may not necessarily indicate that Middle Eastern jobs face heightened risks of cancellation as the disputes of the contract could very well be project-specific. Among companies under coverage, IJM and
Gamuda have the least exposure to the Middle East while Sunway Holdings and Muhibbah have significant exposures exceeding 40% of their total order books. Our underweight call on the construction sector remains unchanged. However, we reiterate our valuations and calls on construction companies under coverage.


On Malaysia
• Sime Darby withdraws bid to privatize IJN
• Genting’s Singaporean casino to be fully launched in 2011
On The Global Front
• UK house prices experience biggest drop since 1991
• Toyota to halt production at Japanese plants for 11 days
• Construction (Underweight) – No safe haven in the Middle East

Sime Darby Bhd (SIME MK, Buy, TP: RM6.40) has withdrawn its bid to privatise the National Heart Institute (IJN), a move which relieves the cabinet from reversing its earlier approval of the proposal. The conglomerate said it decided not to pursue the plan after taking into account public sentiment and feedback received since its proposal was made public on December 18. “Sime Darby would nevertheless continue to look for opportunities for expansion in the healthcare sector”, the company said. (Financial Daily)
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The two new appointees to the board of Star Publications (M) Bhd (STAR MK, Hold, TP: RM3.60) are likely to be made executive directors under the reorganisation of the media company’s board, according to sources. Last Monday, Star announced that it had roped in two new board members with notable experience in the media industry – Datuk Clement Hii Chii Kok and Ng Beng Lye, as non-independent and non-executive directors, a move seen as paving the way for the duo to assume executive roles. (Financial Daily)
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Sunway Holdings Bhd (SGW MK, Buy, TP: RM0.92) and Goldman Sachs Strategic Investments (Asia) LLC have entered into a subscription agreement with Sunway Global Ltd that will be effected by capitalising the amount owing to the two companies by the latter. Under the agreement, Sunway Holdings and Goldman Sachs will subscribe for 78.69m and 57.62m share of HK$1 each in Sunway Global, a 60% subsidiary of Sunway Holdings. In an announcement to Bursa Malaysia yesterday, Sunway Holdings said it would also subscribe for 155.31m shares in Sunway Global for HK$155.31m (RM70.30m) cash. It said the exercise would place the subsidiary in a position to benefit from the economic stimulus package in China. On completion of the exercise, it will hold 79.88% in Sunway Global while Goldman Sachs will hold 19.78%. (Financial Daily)
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Former chief executive officer of Aseambankers (M) Bhd Surachet Chaipatamanont is slated to join Hong Leong Bank (HLBK MK, Buy, TP: RM6.40), according to sources. “Surachet is joining Hong Leong as a consultant for its investment banking arm. He is expected to join the investment bank as the CEO but that is subject to Bank Negara’s approval”, said a source. Banking analysts are viewing this development positively. (Financial Daily)
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Resorts World at Sentosa Pte Ltd, a unit of Genting International Ltd, says its integrated resort may be fully completed and officially launched in 2011. The casino, the Universal Studio Singapore theme park, the Festive Walk and four hotels (namely Hotel Michael, Maxim Towers, Hard Rock Hotel and Festive Hotel) are due to be launched in the first quarter next year. However, the world’s biggest oceanarium, Marine Life Park, the Spa Villas and the Equarius Hotel will be launched later. (BT)
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AEON Co (M) Bhd, which operates the Jusco department store chain, expects to open two retail stores this year. Its general manager of the corporate affairs division, A. Rashid Adam, said one of the new stores will be located in Malacca and the other in Cheras in the Klang Valley. (BT)
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Automotive sales in the country are expected to drop 8.1% to 501,500 units this year from an expected 545,440 units in 2008, mainly due to weakening consumer spending on the back of the economic slowdown, Frost & Sullivan GIC Malaysia Sdn Bhd said. Frost & Sullivan Asia Pacific partner and head of the automotive and transportation practice Kavan Mukhtyar said the projected decline in total industry volume (TIV) was also due to an expected bumper sale in 2008, a lack of new and upcoming mass-market car models and a marginal increase in unemployment rate. Mukhtyar added that only the multi-purpose vehicle (MPV) segment was likely to grow; at 7.2% y-o-y to 57,000 units in anticipation of Proton’s MPV launch in 1Q09, and the Perdoua MPV in 4Q09. Nevertheless, he said the impact on the automotive sector would be cushioned by marginally lower interest rates, continued demand from replacement car buyers, lower inflation rate, sustained economic growth from the government’s stimulus package and the new launches in the MPV segment. (Financial Daily)
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Zelan Bhd’s outgoing chief executive officer Albert Chang contended that it was not at his request that his contract with the company be allowed to lapse at the end of this month. Chang said MMC Corporation Bhd’s press release dated Dec 3, 2008 did not accurately reflect the events leading to the non-renewal of his contract. In the release, MMC said: “Zelan’s board of directors had allowed the contract of its CEO, Albert Chang, to lapse on Jan 31, 2009, at his request.” (Financial Daily)
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Parkson Holdings Bhd’s 53.68%-owned Hong Kong listed subsidiary, Parkson Retail Group Ltd, expects a 7%-8% decline in same store sales (SSS) for the fourth quarter of 2008. Announcing this to Hong Kong stock exchange on Tuesday, Parkson Retail said this was partly due to the continuing deterioration of the trading environment along the coastal region of China. It said the deferment of the new year holiday sale season, which started on Dec 31, 2008, compared to the
2008 sale season that started on Dec 29, 2007, had affected the SSS for the fourth quarter by more than 2.5%.(Financial Daily)
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Stocks rallied Tuesday as investors looked beyond the Federal Reserve’s dour outlook on the economy and instead scooped up shares hit in last year’s big selloff. The DJIA rose 62.2 points (+0.7%, close 9,015.1). The S&P 500 gained 0.8% (+7.3 pts, close 934.7) and the Nasdaq composite climbed 1.5% (+24.4 pts, close 1,652.4). In currency trading, the dollar gained versus
the euro and the yen. US light crude oil for February delivery fell US$0.23 to settle at US$48.58 a barrel on the New York Mercantile Exchange. (CNNMoney)
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The U.S. economy ended the year in a steep decline, with factory orders, home sales and service industries all contracting further, reports showed yesterday. The Institute for Supply Management’s index of non-manufacturing businesses was 40.6 for December, a higher-than-forecast reading that was still the second-worst on record. The National Association of Realtors index of pending home resales fell 4% in November, and the Commerce Department said orders at U.S. factories slumped for a fourth month. With little prospect of growth in private demand, a turnaround may hinge on the tax and spending proposals President-elect Barack Obama is aiming at middle-class households and businesses. (Bloomberg)
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Federal Reserve officials are focused on driving down the spreads between U.S. Treasury yields and consumer and corporate loans, after cutting the main interest rate to almost zero failed to revive lending. Credit costs for households and businesses haven’t followed yields on government debt lower. Fifteen-year fixed-rate mortgages were at 5.06% last week, 2.59
percentage points above 10-year Treasury yields; the spread averaged 0.88 point in 2003, when the Fed slashed rates to 1%. Chairman Ben S. Bernanke sees the thawing of frozen credit markets as critical to a recovery, and is determined to try to prevent a second wave of credit distress as the U.S. weathers bad economic news over the next two quarters. The Fed is now looking at ways to revive lending by using its balance sheet to hold loans and bonds that investors don’t want. (Bloomberg)
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Europe’s inflation rate fell to the lowest in more than two years in December as oil prices plunged and consumer spending slumped, increasing the scope for the European Central Bank to reduce borrowing costs further. Consumer-price inflation in the euro area slowed to 1.6% from 2.1% in November, moving below the ECB’s 2% ceiling for the first time since August 2007, the European Union statistics office said yesterday. A separate report showed the region’s services industry
contracted for a seventh month. As the global financial crisis damps economic growth, slowing inflation may prompt the ECB to extend a series of interest-rate cuts that already has seen its key rate fall by 1.75 percentage points since early October. The euro extended declines after the inflation report, falling to a three-week low. (Bloomberg)
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U.K. house prices had the biggest drop since at least 1991 last year and consumer confidence slumped as banks rationed credit and homebuyers shunned the property market, Nationwide Building Society said. The price of a home declined an annual 15.9% in December to £153,048 (US$223,235), slipping 2.5% m-o-m, the mortgage lender said yesterday. Nationwide said “highly volatile” conditions make it difficult to give a forecast for house prices in 2009. The Bank of England will probably cut the benchmark interest rate further this week after reducing it in December to 2%, the lowest since 1951, economists say. Prime Minister Gordon Brown also plans to unveil new measures to bolster the economy as it endures its first recession since 1991. (Bloomberg)
* * * * *
Toyota Motor Corp, the world’s biggest automaker, is to halt production at all its Japanese plants for a total of 11 days in February and March in a bid to reduce stocks of unsold cars as demand has slumped. Toyota had already announced a 3- day production halt this month at its 12 directly operated Japanese plants. (Reuters)
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