15 January 2009 Newz Bits

January 15, 2009 at 4:26 am 1 comment

TALKING POINT
A welcomed rejection
TMI and its consortium lost their bid for the 3rd national mobile licence in Iran. While the news may come as a setback to TMI’s expansion in Iran given the limitation of 35,000 subscribers in its current licence, we welcome the rejection. We are now less concerned about TMI gearing up to expand regionally, as its current gearing levels are already quite high at 1.5x. Had TMI been
successful, earnings will likely take a dip from higher financing costs to owing to additional capex, not to mention other risk factors such as execution and country risks. We maintain our BUY call on TMI with an unchanged target price of RM5.95 based on sum-ofparts valuation.

HIGHLIGHTS
On Malaysia
· MSWG questions the benefits of the new LCCT in Labu
· RAM says government may need to spend another RM10bn under a second stimulus package
On The Global Front
· U.K. pledges to guarantee £21.3bn of loans to companies
· Germany’s economy may have contracted the most in more than two decades in 4Q08
REPORTS
· TM International – A welcomed rejection (Buy; RM:3.62; TP: RM5.95)

The head of the Minority Shareholder Watchdog Group (MSWG) has questioned the benefits of the new low-cost carrier terminal (LCCT) in Labu, Negri Sembilan, proposed by Sime Darby Bhd (SIME MK, Buy, TP: RM6.40) and AirAsia Bhd (AIRA MK, Buy, TP: RM1.90). She said while there may be persuasive arguments for Sime Darby and AirAsia to build a new LCCT, the watchdog group believes that an orderly development and construction of airports and aviation infrastructure in the country must be given the utmost consideration to ensure optimisation of resources in line with the country’s National Airport Masterplan. While it is good to have competition, whether there is room for two LCCTs to be developed is debatable. MSWG believes that the proposed LCCT will hurt airport operator Malaysia Airports Holdings Bhd (MAHB) as it will cannibalise the existing capacity of KLIA given that AirAsia commands 16% and 49% of the international passenger and domestic passenger movements respectively at the airport. (BT)
Thoughts: The need for a new LCCT with vastly higher capacity is undisputable due to AirAsia’s phenomenal growth rate. The existing LCCT at KLIA is already operating at its 10m annual capacity. While the expansion works on the existing LCCT will be completed very soon, its additional capacity of just 5m will not be sufficient to cater to AirAsia’s need beyond 2010 and
the existing LCCT site has no further room for expansion. As such, a new LCCT is required. While MAHB has plans to build a permanent LCCT near the KLIA main terminal, no progress has been made so far. The government may now have to decide once and for all who is to build the new LCCT.
* * * * *
Senegal plans to spend US$820m on a new airport and highway and it wants Malaysian companies to bid for these projects. Its ambassador to Malaysia Abdel Kader Pierre Fall said the authorities are finalising the packages for the proposed projects. Senegal needs to build a new airport because the existing Leopold Sedar Senghor International Airport in Dakar is congested due to rising passenger and freight traffic. (BT) Thoughts: Local construction players which have expertise in building airports such as Gamuda (GAM MK, Buy, TP: RM2.28) and WCT may benefit from these projects. However, the recent debacle on the cancellation of WCT’s Meydan Racecourse contract in Dubai highlights the implementation risk of overseas jobs. As Senegal remains largely an unchartered territory, caution cannot be further emphasised before local construction companies make their foray into this new market.
* * * * *
MBM Resources Bhd has kicked off its foray into property development by entering a joint venture with its 86%-owned subsidiary Federal Auto Holdings Bhd (FAHB) to develop the latter’s property in Kuala Lumpur. The joint venture, through another 70%-owned subsidiary Inai Benua Sdn Bhd, will develop the property into a 26-storey high-rise commercial office block with showrooms. (Financial Daily)
* * * * *
Cahya Mata Sarawak Bhd (CMSB) has acquired an additional 6.26m shares of 25 sen each in UBG Bhd at RM15.5m cash, thereby raising its stake in the latter to 39.1%. CMSB said yesterday the shares, which had a market value of RM17.3m as at December 31, 2008, were acquired by its fund manager via the open market and funded by borrowings. It has acquired a total of 1.9% stake in UBG in the last six months. (Financial Daily)
* * * * *
RAM Holdings Bhd estimates that the government may spend another RM10bn under a second stimulus package to prevent the economy slipping into a recession, its chief economist says. Dr Yeah Kim Leng said a pressing concern for the government was the destruction of economic capital in terms of jobs and businesses. He noted that other world economies have opted for fiscal stimulus packages ranging between 3-4% of their gross domestic product (GDP). “Malaysia’s existing stimulus package (of RM7bn) was 1% (of GDP), so if we add another 1% (ranging between RM7bn and RM10bn) and the fiscal deficit increases to more than 5%, it’s manageable,” he added. (BT)
* * * * *
Real wages in Malaysia have dropped dramatically over the last 10 years since the Asian financial crisis. According to the Reshaping Economic Geography Report in East Asia, an East Asian and Pacific region companion volume to the World Development Report 2009, the growth in real wages had reduced significantly to 1.9% post-crisis from 5.6% per annum for export-oriented industries. Meanwhile, for domestic-oriented industries such as food, beverages as well as tobacco, growth in real wages had fallen to 1.4% post-crisis from 6.8% per annum. According to report author Dr Yukon Huang, the fall in real wages was in tandem with the drop in GDP over the last 10 years. (StarBiz)
* * * * *
Timber prices in the United States had fallen to their lowest levels since early 1990s, as the worldwide housing slump dries up wood demand for use in construction. The drop in timber prices was less severe for tropical hardwoods, local players said, but prices were expected to head lower as key markets the US, Europe and Japan fell into recession. “We are still getting
good volume from Japanese buyers, but prices had gone down quite substantially compared with a year ago,” a company official at Sarawak-based Ta Ann Holdings Bhd said. The official said bad weather in Sarawak in the past few weeks had somewhat limited logging activities and this might help keep prices in check in the coming months. (StarBiz)
* * * * *
Stocks slumped Wednesday as a bleak retail sales report and more dour news from the banking sector amplified fears of a prolonged recession. Wednesday’s decline extends the 2009 sell-off. Stocks have slipped through much of the first two weeks of the year as worse-than-expected economic and corporate news has caused investors to question the year-end rally. The DJIA lost 248.4 points (-2.9%, close 8,200.1). The S&P 500 slid 3.4% (-29.2 pts, close 842.6) and the Nasdaq composite shed 3.7% (-56.8 pts, close 1,489.6). In currency trading, the dollar gained versus the euro and the yen. U.S. light crude oil for February delivery fell US$0.50 to settle at US$37.28 a barrel on the New York Mercantile Exchange. (CNNMoney)
* * * * *
The U.S. economy weakened further in the past month across almost all regions, hurt by a lack of credit and declines in retail sales, the Federal Reserve said in its regional business survey. According to the Fed, most districts noted reduced or low activity across a wide range of industries. Yesterday’s Beige Book underscores the picture of a downturn that both private
forecasters and Fed officials predict will be the longest since the 1930s. Fed Chairman Ben S. Bernanke and his colleagues are forecast to keep the main interest rate close to zero and explore taking on more assets to unfreeze credit when they meet January 27-28. (Bloomberg)
* * * * *
Sales at U.S. retailers fell more than twice as much as forecast in December as job losses and the lack of credit led Americans to cut back on everything from car purchases to eating out. The 2.7% slump marked the sixth straight month of declines, the longest string since comparable records began in 1992, the Commerce Department said yesterday. Today’s sales figures indicate the hit to spending in the recession is even deeper than estimated, and spurred a sell-off in stocks. The loss of 2.6m jobs and declining home and stock values are squeezing households, hurting retailers from Wal-Mart Stores Inc. to Tiffany & Co., which yesterday said its holiday sales fell 21% and cut its earnings forecast. (Bloomberg)
* * * * *
U.K. Prime Minister Gordon Brown pledged to guarantee £21.3bn (US$31bn) of loans to companies, as European leaders acknowledged the failure of bank bailouts and spending plans to contain the recession. Brown’s plan, coming the day after German Chancellor Angela Merkel announced a similar 100bn euro (US$133bn) fund, underscores the urgency of reviving credit to limit unemployment and sustain consumer spending. Spending and tax cuts alone won’t be enough to spur economies as bank write-downs worldwide approach US$1trn, Federal Reserve Chairman Ben Bernanke said Tuesday. (Bloomberg)
* * * * *
Germany’s economy may have contracted the most in more than two decades in 4Q08 as the global financial crisis hurt exports and damped spending, the Federal Statistics Office said. The economy probably shrank between 1.5-2% q-o-q, Norbert Raeth, an economist at the statistics office, said yesterday. A 2% drop would be the worst quarterly contraction since German reunification in 1990 and the most for West Germany since the first quarter of 1987. Companies are scaling back production and cutting jobs as global economic expansion slows and demand for German exports wanes. Bundesbank President Axel Weber last week indicated the economy may contract more this year than the bank’s 0.8% forecast. A decline of more than 0.9% would be Germany’s worst performance since records began after World War II. (Bloomberg)
* * * * *
Thailand’s central bank cut its interest rate more than economists expected for a second month after inflation cooled to the slowest pace in six years and political protests sent confidence to a record low. The Bank of Thailand lowered its one-day bond repurchase rate by three-quarters of a percentage point to 2%. Thailand joins Indonesia, South Korea and Taiwan in cutting borrowing costs this month as the global recession curtails demand for Asian exports. Premier Abhisit Vejjajiva, four weeks into the job, is spending more to counter a slump in tourism and domestic demand after six months of political turmoil. (Bloomberg)
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TM International – A welcomed rejection 16 January 2009 Newz Bits

1 Comment Add your own

  • 1. » 15 January 2009 Newz Bits  |  January 15, 2009 at 5:25 am

    […] infodragon wrote an interesting post today onHere’s a quick excerpt TALKING POINT A welcomed rejection TMI and its consortium lost their bid for the 3rd national mobile licence in Iran. While the news may come as a setback to TMI’s expansion in Iran given the limitation of 35,000 subscribers in its current licence, we welcome the rejection. We are now less concerned about TMI gearing up to expand regionally, as its current gearing levels are already quite high at 1.5x. Had TMI been successful, earnings will likely take a dip from higher financing costs to owing to additional capex, not to mention other risk factors such as execution and country risks. We maintain our BUY call on TMI with an unchanged target price of RM5.95 based on sum-ofparts valuation. HIGHLIGHTS On Malaysia · MSWG questions the benefits of the new LCCT in Labu · RAM says government may need to spend another RM10bn under a second stimulus package On The Global Front · U.K. pledges to guarantee £21.3bn […] […]

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