7 August 2009 : Newz Bits

August 7, 2009 at 1:54 am Leave a comment

TALKING POINT


Malaysian Airline System – Poor operating results
While MAS posted a net profit of RM875.5m in 2Q09, results were distorted by net derivative gains of RM1.34bn, mainly arising from higher q-o-q mark-to-market oil price. MAS registered weak operational statistics across the board. Though load factor improved to 65.8% in 2Q09, yield dropped 20% q-o-q due to a string of promotional discounts in 2Q09. Furthermore, MAS has not made much headway in cutting non-fuel costs. We reiterate our sell call on concerns of a sustained weak operational and financial performance in the next 18 months.
HIGHLIGHTS


On Malaysia

· Sunway City may revive plans to float its property assets through a REIT in 2010
· Maxis’ unit, Aircel Cellular Ltd, reported to have raised US$3bn in debt to expand operations
On The Global Front
· Number of Americans filing claims for jobless benefits fall more than economists forecast
· Bank of England expands bond purchase program beyond its original limit to spur lending
REPORTS
· TSH Resources – 2QFY09 Results (Buy; RM1.74; TP: RM2.10)
· Boustead Heavy Industries – 2QFY09 Results (Hold: RM4.86: TP; RM4.96)
· Malaysian Airline System – 2QFY09 Results (Sell; RM3.10; TP: RM2.00)

National Carrier Malaysia Airlines (MAS) (MAS MK, Sell, TP: RM2.00) will impose an across-the-board salary freeze from next year, says its chief. The salary freeze is expected to save the airline some RM100m next year as it seeks to conserve cash in a tough operating environment. “If there are any other specific areas where we intend to make further reduction by allowances, it will not be made unilaterally. It will be made after consulting our union and staff members,” said MAS managing director and chief executive officer Datuk Seri Idris Jala. (BT)
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AirAsia Bhd (AIRA MK, Buy, TP: RM1.90) has signed an “Amendment Agreement” with Airbus SAS to defer the delivery of eight Airbus A320 aircraft from 2010 to 2014, due to infrastructural constraints with the current airport facilities and until the new low-cost carrier terminal (LCCT) is constructed. “With the deferment, the original delivery of 24 aircrafts in 2010 shall be reduced to 16 aircrafts,” AirAsia said. The rationale to scale down the delivery of aircraft in 2010 and possibly 2011 was to enable the budget airline to optimise its fleet and avoid costs associated with leaving aircraft idle or under utilised due to infrastructural limitations. The company said there were no penalties payable by AirAsia in revising the delivery schedule for 2010 and 2011. (Financial Daily)
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Sunway City Bhd (SunCity) (SCITY MK, Buy, TP: RM3.60) may revive a US$860m (RM3.01bn) plan to float its property assets through a real estate investment trust (REIT) in 2010 depending on the recovery in the markets, a top executive said. The listing plan will see SunCity injecting its retail property assets such as shopping malls, hotels and theme parks into an investment trust. “This would be one of the largest REIT exercises in Malaysia, so we would need foreign interest to take up some of the units. Once the foreign appetite for our real estate sector comes back then we will come in, “ said managing director Ngeow Voon Yean. (Financial Daily)
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YTL Land & Development Bhd, unit of YTL Corporation Bhd (YTL MK, Buy, TP: RM8.00), hopes to sell its remaining units of its latest property development, Centrio, when a new financial package is offered from this weekend. The package is launched in conjunction with the opening of small office/home office (SOHO) show units to the public. Sales and marketing senior manager Jessica Loo said the financial package, which would be available for two weeks, would give up to RM150,000 rebates to purchasers of the available units at Centrio. “About 75% of the units at Centrio have been taken up. We hope this special package will help boost sales for the remaining units,” she added. (StarBiz)
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Maxis Communications Bhd’s 74%-owned unit, Aircel Cellular Ltd has been reported to have raised US$3bn (RM10.47bn) in debt to expand operations. India’s Economic Times, citing unidentified sources, said yesterday Aircel has raised the financing, in a combination of rupee and dollar, from the State Bank of India and Standard Chartered plc. It has been previously reported that Maxis needs to spend US$5bn for its Indian operations over the next three to five years and part of that funding would be raised from the mobile operator’s much anticipated listing exercise this year. (Malaysian Reserve)
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Fitch Ratings yesterday said the probability of capital impairment in Malaysian banks still appear fairly low, notwithstanding extremely challenging macroeconomic conditions and reasonably-stressed assumptions simulated by the agency. Also, the banks’ earning – although likely to be lower in 2009 and 2010 compared to 2008 – appear adequate in fully absorbing the credit costs associated with asset quality deterioration. This means their loss absorption capacity would likely remain adequate and financial strength largely intact, which is the main reason Fitch maintains a “stable outlook” on the local banks’ credit ratings, despite very weak macroeconomic indicators. Nonetheless, it notes that further downside risks cannot be entirely ignored, and despite some improvement in market sentiment in recent weeks, there are still considerable uncertainties on the prospects of a sustainable economic recovery over the next 12 to 18 months. (StarBiz)
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Malaysia has proposed to Brunei the possibility of embarking on joint oil exploration in the territorial waters of both countries. Prime Minister Datuk Seri Najib Tun Razak said the Malaysian side was also looking at various aspects, including the role of Petronas, which would be worked out within the framework of the Malaysia-Brunei Letters of Exchange (LoEs) pertaining to the demarcation of land and maritime borders. He said the proposal was among the consequential matters following the signing of the LoEs on March 16 in which he and Sultan Hassanal Bolkiah reaffirmed their commitment to work together towards the expeditious implementation of elements agreed upon in the document. Energy, hydro, halal hub, Islamic banking, oil palm cluster and tourism are among the various proposed collaborations between the two countries. (Malaysian Reserve)
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Stocks dipped Thursday – ahead of the closely watched July jobs report – with investors bailing out of tech, financial and commodity shares in a step back from the big rally of the past month. Today brings the week’s biggest economic report, the July jobs report. Employers are expected to have cut 328,000 jobs from their payrolls after slashing 467,000 jobs in the previous month, according to Briefing.com. The unemployment report, generated by a separate survey, is expected to have inched up to 9.6% from 9.5% last month. A worse-than-expected report could cause a big sell-off on Wall Street, especially after the recent run up stocks have had. The Dow Jones industrial average lost 0.3% (-24.7 pts, close 9,256.3). The Nasdaq lost 1.0% (-19.9 pts, close 1,973.2) and the S&P 500 index lost 0.6% (-5.6 pts, close 997.1). U.S. light crude oil for September delivery fell 3 cents to settle at US$71.94 a barrel on the New York Mercantile Exchange. (CNNmoney)
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The number of Americans filing claims for jobless benefits fell more than economists predicted, a sign some employers have stopped paring staff as the recession eases. Applications dropped by 38,000 to 550,000 in the week ended Aug. 1, figures from the Labour Department showed yesterday in Washington, the fifth straight time claims were under 600,000 after being above that level since January. The total number of people collecting unemployment insurance rose. The pace of job cuts isn’t slowing fast enough to keep unemployment from rising. A report today will show the jobless rate jumped to the highest in 26 years in July, economists surveyed by Bloomberg News predict. The four-week moving average, a less-volatile measure than weekly initial claims, fell to 555,250 from 560,000 the prior week. The level of continuing claims increased by 69,000 to 6.31m in the week ended July 25. (Bloomberg)
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The U.S. unemployment rate is likely to keep rising even as the US$787bn stimulus plan provides more support in the short term, President Barack Obama’s top economist said. “The bottom line is that we are no doubt in for more turbulent times,” Christina Romer, chairman of the White House’s Council of Economic Advisers, said yesterday in a speech in Washington. Even after gross domestic product starts to expand, “it will likely take still longer for employment to stop falling and begin to rise.” “The composition of the stimulus will be changing toward components with larger short-run effects,” Romer said, adding that the early phase of the program focused more on taxes and assistance to state governments. Additional “direct government investments” in coming months will have short-term effects that are about 60% stronger than the tax cuts, she said. (Bloomberg)
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European Central Bank President Jean-Claude Trichet indicated the economy may recover sooner than previously anticipated and signalled the bank is unlikely to provide any further stimulus. “The overall mood today is a little bit better than it was before,” Trichet said at a press conference in Frankfurt after the ECB left its benchmark interest rate at a record low of 1%. Rates are “appropriate” and policy makers are “satisfied” with their asset-purchase program and measures to improve the flow of credit, he said. The ECB’s more optimistic tone contrasts with the Bank of England, which yesterday expanded its bond-purchase plan to fight a recession that’s deeper than it initially expected. With unemployment rising in Europe and consumer prices falling at the fastest pace on record, Trichet said the economy will remain weak this year and the ECB is taking a “prudent and cautious” approach. (Bloomberg)
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The Bank of England expanded its bond purchase program beyond its original limit in an effort to spur lending and fight a recession that’s deeper than previously anticipated. Bond yields plunged after the Monetary Policy Committee, led by Governor Mervyn King, kept the key interest rate at 0.5% and increased its purchase program by £50mn (US$84bn) to £175bn. The Bank of England’s move suggests policy makers, who based the decision on quarterly forecasts prepared this month, assessed that their stimulus plan and record low interest rates weren’t enough to quell the threat of deflation. While services grew at the fastest pace in 1 1/2 years in July, unemployment is rising and banks have kept restricting access to credit. (Bloomberg)
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German factory orders posted their biggest increase in two years in June, the latest sign that Europe’s largest economy is emerging from the recession. Orders, adjusted for seasonal swings and inflation, jumped 4.5% m-o-m, the Economy Ministry in Berlin said yesterday. That was the most since June 2007 and the fourth successive monthly gain. Economists predicted an increase of 0.6%, the median of 37 estimates in a Bloomberg News survey showed. Orders were still 25.3% lower y-o-y. The government said its forecast that the economy will contract by 6% this year may now be too pessimistic, and some economists predicted a return to growth as soon as this quarter. Business confidence rose for a fourth month in July. The increase in June was driven by an 8.3% surge in export orders, the report showed. (Bloomberg)
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The Bank of Japan will probably forecast that declines in consumer prices will extend into 2011 even as the economy recovers, according to two people familiar with the matter. The estimate would be included in policy makers’ first economic projections for the financial year ending March 2012, scheduled for release in October, said the people, who declined to be identified ahead of the report. Central bankers have already predicted prices will fall 1.3% in the current year and 1% in fiscal 2010. Prospects for a third year of deflation make it likely Bank of Japan Governor Masaaki Shirakawa and his colleagues will keep interest rates near zero through next year. Japan is beginning to emerge from its worst post-war recession as exports improve and manufacturers boost production to replenish inventories. Deflation may escalate as households, whose spending accounts for more than half of the nation’s gross domestic product, delay purchases on the expectation that goods will get cheaper, restraining a recovery in the world’s second-largest economy. (Bloomberg)
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8 April 2009 : Newz Bits Boustead Heavy Industries – 2QFY09 : Results Continue To Improve

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