29 January 2009 Newz Bits

HIGHLIGHTS


On Malaysia

· HL Bank and RHB Bank also reduce BLR by 55bps to 5.95%
· Gulf Petroleum Ltd has no intentions to shelf US$5bn oil and gas complex development in Malaysia
· Malaysia’s palm oil exports fall 24% in first 25 days of January
On The Global Front
· US House passes US$819bn stimulus package
· Indonesia proposes IDR71.3tn stimulus package
· Bank of England may need to buy assets and print money within next six months
· World Bank forecasts China’s GDP growth at 7-8% in 2009

Hong Leong Bank group (HLBK MK, Hold, TP: RM5.80) and RHB Bank group will reduce their base lending rates (BLR) and Islamic financing rates (IFR) by 55 basis points to 5.95% from 6.5% with effect from Feb 3. Hong Leong Bank said in a statement the reduction in the BLR/IFR would translate into lower cost of financing for its customers and businesses and support Bank Negara’s objective of promoting domestic economic activities. (StarBiz)
* * * * *
Malaysia Airlines (MAS) (MAS MK, Under review) is contemplating using the low-cost carrier terminal (LCCT) in Sepang, in the event that AirAsia Bhd moves out. And the likely user of the budget terminal will be the national carrier’s wholly-owned subsidiary, FlyFirefly Sdn Bhd. Business Times has learnt that Firefly, which currently operates turbo-propeller planes from its
Subang and Penang hubs, is likely to expand its scope of flights by using jets to fly out of LCCT. (BT)
* * * * *
Time dotCom Bhd (TdC) needs a complete revamp in both business plan and also mindset shift to turn things around, CEO Afzal Abdul Rahim said. A new business turnaround plan, which was approved by the board on Jan 21, is divided into four sections: a business plan, turnaround initiatives, divisional initiatives and quick win labs. As for the business plan, the company will still focus on the wholesale, corporate and enterprise markets but what will change is the way products offered are packaged and the quality of service. Afzal has also flattened the organisational structure and de-coupled TdC from the United Engineers (M) Bhd group. Capital expenditure had been slashed from over RM100m to RM40m this year he said. (StarBiz)
* * * * *
Bank Negara Malaysia announced yesterday it will issue the first of two three-year Merdeka Savings Bond series slated for 2009 amounting to RM1bn each on March 18. The bond will be offered to Malaysians aged 56 years and above and those who have retired on medical grounds. The bond offers a return of 5% per annum. (Financial Daily)
* * * * *
The 1% fall in palm oil purchase from Malaysia does not necessarily imply China is a saturated market, says Malaysian Palm Oil Council. Malaysia’s 23-year record of rising palm oil exports to China ended last year when shipments dipped by 1% to 3.8m tonnes. However, there is no need to be alarmed, said Malaysian Palm Oil Council (MPOC) chief executive Tan Sri Yusof Basiron. He explained that last year’s dip was caused by extreme market volatility as prices fell for seven months from April. (BT)
* * * * *
Gulf Petroleum Ltd said it has no plans to cancel or defer the development of a US$5bn (RM18bn) integrated oil and gas complex in Malaysia despite the global financial crisis and the plunging oil price. President Ir Abdulaziz Hamad Al-Delaimi said the global financial meltdown will not affect its decision on this long-term project. He said a number of financiers and investors, particularly from the Arabian Gulf countries, are still keen to finance the project due to its viability. Gulf Petroleum has reached an agreement with an identified EPCC contractor, who will conduct the environmental impact assessment study on the proposed location, its director Nor Azmi Abdullah said. (BT)
* * * * *
Malaysia’s palm oil exports fell 24% in the first 25 days of January compared with the same period the previous month, Societe Generale de Surveillance (SGS), an independent cargo surveyor, estimated yesterday. A total of 1.02m tonnes of palm oil were tracked January 1-25, SGS said in an e-mailed report. Malaysia exported 1.34m tonnes of palm oil in the same period in December, according to the surveyor. (Bloomberg)
* * * * *
More than 10,000 Malaysians have lost their jobs since Jan 1, Malaysian Employers Federation (MEF) executive director Shamsuddin Bardan disclosed yesterday. He told Bernama that more were expected to be jobless in the days ahead as companies particularly in the manufacturing sector struggle to keep their businesses afloat. (Financial Daily)
* * * * *
Stocks surged Wednesday as investors took comfort in reports that the Obama administration and the Federal Reserve are taking steps to get credit flowing again and help staunch the economic slowdown. The DJIA gained 200 points, or 2.5%. The S&P 500 index added 28 points or 3.4% and the Nasdaq composite added 53 points or 3.6%. The Dow has now gained for three sessions in a row, while the S&P 500 and Nasdaq have gained for four sessions in a row. U.S. light crude oil for March delivery rose 58 cents to settle at $42.16 a barrel on the New York Mercantile Exchange. (CNNMoney)
* * * * *
The House of Representatives passed an US$819bn economic stimulus package Wednesday on a party-line vote, despite President Obama’s efforts to achieve bipartisan support for the bill. The Senate is likely to take up the bill next week. Congress has put the legislation on a fast track, as many lawmakers on both sides of the aisle agree that fast action is needed to help pull the economy out of a deep recession. Both Democratic and Republican leaders have said they aim to get the bill to Obama’s desk for him to sign before Congress’ Presidents Day recess in mid-February. (CNNMoney)
* * * * *
Indonesia’s government has proposed an economic stimulus package worth 71.3trn rupiah ($6.32bn) in a bid to sustain growth in Southeast Asia’s biggest economy, the finance minister said. Details of the package, which needs to be approved by parliament, have been announced previously in bits and pieces. It includes tax incentives for companies and individuals, cuts in
fuel and electricity prices and infrastructure spending. The government has forecast economic growth will slow to 4.5-5.5% in 2009, down from an estimated 6.2% last year. (Reuters)
* * * * *
The Bank of England may need to buy assets and print money within the next six months as the U.K. Treasury works to rescue the economy from recession, according to Barclays Plc economist Simon Hayes. The forecast also suggests Chancellor of the Exchequer Alistair Darling may add to the £20bn (US$29bn) stimulus program of tax cuts and spending increases announced in December. Darling and Bank of England Governor Mervyn King may detail as soon as today a
framework for policy makers to buy £50bn of assets, which the Treasury authorized on Jan. 19. (Bloomberg)
* * * * *
China’s economy will probably grow by between 7 and 8% this year, as the government’s fiscal stimulus policies take hold, the World Bank’s chief economist said yesterday. The world’s third-largest economy will probably grow by 6 to 7% in the first quarter from a year earlier and average 7% in the remaining quarters, Justin Lin said on the sidelines of the annual meeting of the World Economic Forum. (Reuters)
* * * * *
Up to 51m jobs worldwide could disappear by the end of this year as a result of the economic slowdown, the International Labour Organisation said yesterday. Under its most optimistic scenario, this year would finish with 18m more unemployed people than at the end of 2007, with a global unemployment rate of 6.1%. More realistically, it said 30m more people could lose their jobss if the financial turmoil persists through 2009, while the worst-case scenario would be 51m jobs lost, pushing up the unemployment rate to 6.5%. (Reuters)
* * * * *
The International Monetary Fund (IMF) yesterday forecast the world economy would slow to a near standstill this year, warning that deflation risks were rising and saying toxic assets need to be removed from the banking system. It cut its forecast for global growth in 2009 to a slight 0.5%, the weakest since World War Two, from a November estimate of 2.2%. (Reuters)
* * * * *
Germany’s inflation rate unexpectedly dropped to the lowest in almost five years in January, increasing pressure on the European Central Bank to cut borrowing costs. The rate, when calculated using a harmonized European Union method, fell to 0.9% from 1.1% in December, the Federal Statistics Office in Wiesbaden said today. Economists expected inflation to hold steady, according to the median of 21 forecasts in a Bloomberg News survey. (Bloomberg)
* * * * *

January 29, 2009 at 2:30 am 3 comments

28 January 2009 Newz Bits

HIGHLIGHTS


On Malaysia

· AMMB Holdings proposed a special issue of 96.3m shares to eligible Bumiputera shareholders
· Sime Darby Property Bhd will undertake an integrated property development valued between RM25bn and RM30bn, spanning 20 years
On The Global Front
· The Japanese government yesterday launched a ¥1.5trn capital injection scheme
· U.S. home prices plunged a record 18.2% in November from a year earlier
· Over 71,400 more job cuts were announced in the US on Monday alone

AMMB Holdings (AMM MK, Buy, TP: RM3.90) has proposed a special issue of 96,300,000 shares to eligible Bumiputera shareholders, at an issue price to be determined after obtaining all relevant approvals, to enable the Group to comply with the Bumiputera equity condition imposed by the Securities Commission pursuant to its approval for the equity participation of
Australia and New Zealand Banking Group (ANZ) in AMMB Holdings. (Bursa)
Thoughts: While this is a “house-keeping” matter in the sense of maintaining regulatory compliance, the added capital raised will stand the Group in stronger stead to withstand the increasingly tougher operating conditions in the immediate term. Core and risk-weighted capital ratios (9.05% and 14.09% respectively) will certainly improve with this issue, which represents 3.4% of the enlarged share capital and will bring in some RM200m for working capital purposes when completed in 2Q09. On the operational front, the recent round of OPR cuts benefits AMMB the most given its large fixed-rate loan portfolio, the only significant risk to earnings being the potential rise in delinquencies. The Group’s larger exposure to consumer loans as against big-ticket business loans give us more confidence in riding out this difficult period, as our BUY call and target price remain unchanged.
* * * * *
Sime Darby Property Bhd will undertake an integrated property development across two states valued between RM25bn and RM30bn, spanning 20 years. Dubbed the Sime Darby Vision Valley (SDVV), the group released its master plan last Friday, elaborating development plans for 32,375ha of its land in Selangor and Negri Sembilan. “The vision valley allows us to realise the value of our land bank in these states, which have been earmarked by the government for future growth and development,” said Datuk Seri Ahmad Zubir Murshid. Ahmad Zubir also expects an earnings margin of not less than 15%. The Selangor Vision City will cover some 4,452ha with a gross development value of RM10bn. It will use the Guthrie Corridor Expressway as a catalyst for its residential and commercial developments. The Negri Sembilan Vision City will use an airport
as its catalyst, given the close proximity of the Kuala Lumpur International Airport. (BT)
Thoughts: Naturally, with the very long span of the project we would not be expecting much substantial changes to our numbers for the property segment especially within the coming 2 financial years. To note, the property segment currently takes up some 13-15% of Sime’s PBT. Looking at the GDV figures and area statements issued by the group, it implies that just the Selangor portion of the SDVV amounts to RM0.9m per acre which is comparable to other mass market housing developments in the Klang Valley. As for the Negri Sembilan portion, assuming an RM20bn GDV on the 27,923ha, it amounts to RM0.3m per acre which we find to be rather low. However, we make no conclusions given the lack of clearer details at this point. Also, while the airport continues to be cited in the news, our conversation with Sime indicates that they do indeed hope for the airport but would most likely only have the part of land sale and development in the project. We continue to have a buy call on Sime Darby (SIME MK, Buy, TP: RM6.40) at this juncture as we see strengthening CPO prices buoying up their earnings.
* * * * *
IJM (IJM MK, Buy, TP: RM6.10) is well on track towards completing a crucial part of the 19km New Delhi-Indra Gandhi Internatonal Airport Metro Line by next year. A Delhi Metro spokesman said IJM Corp Bhd, one of six foreign companies handling civil projects under Phase 2 of the Metro Line, was on schedule in complete its projects on the ultramodern network. (BT)
* * * * *
Deputy Prime Minister Datuk Seri Najib Razak has confirmed that the Cabinet is re-evaluating its approval to AirAsia Bhd (AIRA MK, Buy, TP: RM1.90) and Sime Darby Bhd (SIME MK, Buy, TP: RM6.40) to build a low-cost carrier terminal (LCCT) in Labu, Negri Sembilan. Najib, who is also Finance Minister, said no formal decision had been made as the Cabinet was still evaluating the proposals, declining to say more so as to not “pre-empt the decision”. (Financial Daily)
* * * * *
Industries may receive electricity tariff incentives from the government to reduce their burden and enable them to carry on operations in the midst of the global economic slump. The government, Tenaga Nasional Bhd (TNB MK, Buy, TP: RM6.75) and related parties are in active discussions on the matter. (Financial Daily)
* * * * *
Mobile operators expect to see a decline in their enterprise segment and business users this year, as employers downsize staff strength and reduce employees’ benefits. The trend is ongoing in several countries in the region, including China, which is poised to be one of the better performing economies. “Companies will be less inclined to sign up employees’ (mobile) subscription. In places like China, where the employees have to pay themselves and the companies reimburse them, I think a lot of companies are going to review their reimbursement this year. They are going to say that managers, senior managers, and key salesmen will get a phone account, while the rest won’t,” said IDC Asia Pacific director of telecom services William Rojas.(BT)
* * * * *
The government has not yet decided on the new price for sugar, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said. Before this, Shahrir was reported to have said that the price of sugar might be increased after the Chinese New Year. He said the government was looking at the possibility of raising the price following the rise in sugar price in the international market. Around 80% to 90% of the country’s sugar supply is imported. According to him, if the price of sugar remained at RM1.45/kg, the government would have to subsidise it. (Financial Daily)
* * * * *
The tobacco industry could see a slowdown in cigarette consumption says Philip Morris (Malaysia) Sdn Bhd’s managing director Il-woo Chong. “The Asian market is not a growing market. For Malaysia, it has come to a point where growth would be stagnant,” Chong said. According to statistics by the Confederation of Malaysian Tobacco Manufacturers, the overall industry volume in the first three quarters of 2008 dropped 2.2% from the same period a year earlier. (Financial Daily)
* * * * *
Stocks gained Tuesday, rising for the third-straight session, as investors breathed a sigh of relief that some of the quarterly earnings were less terrible than had been expected. The DJIA gained 58 points, or 0.7%, closing higher for the second session in a row. The S&P 500 index added 9 points, or 1.1% and the Nasdaq composite added 15 points or 1%. Both the S&P 500 and the Nasdaq ended higher for the third session in a row. U.S. light crude oil for March delivery fell $4.15 to settle at $41.58 a barrel on the New York Mercantile Exchange. (CNNMoney)
* * * * *
The Japanese government yesterday launched a ¥1.5trn (RM60.98bn) scheme to buy shares in companies whose future has been threatened by the financial crisis, in a new move to ease the credit crunch that has starved key industries of cash. Confirmation of the capital injection scheme pushed Japanese stocks higher, taking the Nikkei share average’s gains for the day to 4.6%, but dragged on already falling bonds and the yen. (Financial Daily)
* * * * *
India’s central bank reduced its growth forecast for Asia’s third-largest economy on Tuesday due to the deepening worldwide recession as it held leading interest rates at historic lows. The bank cut its growth estimate for this fiscal year to 7% “with a downward bias” from an earlier projection of 7.5 to 8.0%. The bank said it was pausing in its series of aggressive interest rate cuts to assess the impact of the reductions. (BT)
* * * * *
U.S. home prices plunged a record 18.2% in November from a year earlier according to an index from Standard & Poor’s (S&P). Prices in 20 metropolitan areas tracked by S&P fell 2.2% from October as housing continues to suffer from a huge supply of unsold homes, tighter lending standards and record foreclosures. However, the annual rate of decline for the S&P/Case-Shiller composite index for 20 cities was not as steep as economists had expected. (Reuters)
* * * * *
Over 71,400 more job cuts were announced in the US on Monday alone. At least six companies from manufacturing and service industries announced cost-cutting initiatives that included slashing thousands of jobs. More than 200,000 job cuts have been announced so far this year, according to company reports. Nearly 2.6m jobs were lost over 2008, the highest yearly jobloss
total since 1945. (CNNMoney)
* * * * *
Britain’s economy shrank at its fastest pace in nearly three decades at the end of last year, sending the economy into recession for the first time since 1991 as the financial crisis hit even harder than expected. Friday’s bleak data piles pressure on Prime Minister Gordon Brown, under fire after massive job losses, banking sector turmoil and a plummeting currency knocked Britons’ faith in his ability to deal with the global economic downturn. The Office for National Statistics said the economy shrank by 1.5% in 4Q08, the biggest drop since 1980. That followed a 0.6% decline in 3Q08, fulfilling the technical definition of recession. (Reuters)
* * * * *
U.K. house prices had the biggest annual decline since at least 2001 in January, as the recession worsened and banks curtailed lending, Hometrack Ltd. said. The average cost of a home in England and Wales fell 9.4% from a year earlier to 158,300 pounds, the London-based property researcher said in a report today. The monthly decline of 1% was led by London, where prices slid 1.1% from December. (Bloomberg)
* * * * *
The International Monetary Fund (IMF) will cut its 2009 global growth forecast again, this time to between 1% and 1.5%, as economic conditions deteriorate further, an IMF official said on Sunday. The IMF’s most recent forecast, made in November, was for growth of 2.2%. An official release of updated IMF economic forecasts is expected on Wednesday, said Axel Bertuch-Samuels, deputy director of the IMF’s monetary and capital markets department. (Reuters)
* * * * *
Russia plans a 900bn rouble (US$27.4bn, or RM98.96bn) capital injection for commercial banks hit by the economic crisis, with state-controlled lenders set to receive the largest share, government sources said yesterday. Sberbank, Russia’s biggest lender, was likely to receive a 500bn rouble subordinated government loan, one source told Reuters, citing a decision taken at a meeting of the government’s anti-crisis committee. The source said another state-controlled bank, number-two lender VTB, would receive 200bn roubles as part of the latest rescue package. (Reuters)
* * * * *

January 28, 2009 at 7:25 am Leave a comment

23 January 2009 Newz Bits

HIGHLIGHTS
On Malaysia
· Cabinet to study plans to build LCCT at Labu again
· Windfall tax threshold on CPO likely to be raised
On The Global Front
· China’s economy expanded at the slowest pace in 7 years
· Singapore cuts corporate taxes and taps reserves for S$20.5bn stimulus
REPORTS
· Telekom Malaysia – To manage national emergency lines
(Hold; RM3.18; TP: RM2.74)

The cabinet in its meeting on Wednesday decided to study again the plan by AirAsia Bhd (AIRA MK, Buy, TP: RM1.90) and Sime Darby Bhd (SIME MK, Buy, TP: RM6.40) to build a low cost carrier terminal (LCCT) in Labu, Negeri Sembilan, sources said. They said that the cabinet had asked AirAsia to make a presentation to the Ministry of Finance and Economic Planning Unit next Friday on the proposed KLIA East @ Labu, with the view that the project of similar scale and specifications can be carried out within the Kuala Lumpur International Airport (KLIA) grounds in Sepang. According to one of the sources, the cabinet was leaning towards the airport now being constructed within KLIA. It is learnt that if the airport is to be built within KLIA, the cost can be kept to RM1.3bn, lower than the estimated RM1.6bn for the Labu LCCT. It is understood that the government would ask Malaysia Airports Holdings Bhd (MAHB) and AirAsia to work together towards a win-win solution. (Financial Daily)
* * * * *
Malaysia Airports Holdings Bhd (MAHB) said aeronautical charges imposed on airlines using its airports in the country are not determined by the cost of building the terminal or airport. Rather, they are determined and approved by the government and applied on a standard basis across all 39 airports it manages and operates. Aeronautical charges include parking, landing, aerobridge and check-in counters. (BT)
* * * * *
The Ministry of Finance (MoF) could significantly raise the threshold on the imposition of windfall tax on crude palm oil (CPO) though it does not favour the scrapping of the provision to collect tax, sources said. A source said MoF had taken a holistic approach on the windfall tax on CPO and was expected to raise the threshold for the collection to around RM2,600 – RM2,800 per tonne level from the current RM2,000 per tonne threshold. On whether possible changes to windfall tax might be included under the second stimulus package, the source said it was possible and stressed that MoF could finalise its decision on the tax imposed on CPO some time next month. (Financial Daily)
* * * * *
The Asian Strategy and Leadership Institute (ASLI) is projecting a 4% gross domestic product (GDP) growth for Malaysia this year. ASLI’s senior research fellow in economics Datuk Gan Khuan Poh said the domestic economy would accelerate if there was proper policy responses, more lending from banks and a quicker rollout of projects, especially under the Ninth Malaysia Plan. “With the global economic slowdown, Malaysian economic growth will slow down in 2009 but not into recession in the light of strong economic resilience and the policy measures, Gan told a media conference yesterday. (Bernama)
* * * * *
Deputy Prime Minister Datuk Seri Najib Tun Razak said yesterday RM5bn of the RM7bn allocated for the first stimulus package had been transferred to the various operating ministries and agencies. Najib, who is also Finance Minister, said the remaining RM2bn would be transferred by next week. “The entire RM7bn will thus be in the hands of the ministries and agencies and they have to take immediate action…At this stage, we want to ensure the RM7bn is expended quickly. We have instructed all operating ministries to take immediate action,” he said. (Bernama)
* * * * *
FlyFirely Sdn Bhd, the operator of the regional budget carrier Firefly is targeting the lucrative Singapore market as part of its route expansion drive this year. Its managing director Eddie Leong said the proposed takeoff points to Singapore would not be confined to Subang, but would include other secondary airports such as Penang, Ipoh, Melaka, Kuantan and Terengganu. “We have submitted the application to the transport ministry to fly these routes about two weeks ago and hope to fly to the republic by April this year,” Leong said. However, he added that the plan was subject to approval and landing rights by the relevant authorities, and it had yet to determine neither the frequency nor the Singapore airport it will fly to. Firefly is also eyeing a number of other routes and expects to fly to 36 destinations by the end of the year, an increase of 19 routes from its existing 17 destinations. The carrier is currently operating five ATR planes and will receive five more this year. (Financial Daily)
* * * * *
The international reserves of Bank Negara Malaysia grew marginally to RM317.2bn as at January 15. It stood at RM316.8bn as at December 31 2008. The current reserves position is sufficient to finance 7.3 months of retained imports and is 3.3 times the short-term external debt, the central bank said in a statement. (BT)
* * * * *
Stocks slumped Thursday, as a management shakeup at Bank of America and Microsoft’s earnings disappointment weighed on investor sentiment. The Dow Jones industrial average fell 1.3% (-105.30 pts, close 8,122.8). The Standard & Poor’s 500 index lost 1.5% (-12.7 pts, close 827.5) and the Nasdaq composite slid 2.8% (-41.6 pts, close 1,465.5). In currency trading, the dollar gained against the euro and fell against the yen. U.S. light crude oil for March delivery rose US$0.12 to settle at US$43.67 a barrel on the New York Mercantile Exchange. (Bloomberg)
* * * * *
Home prices in the U.S. dropped the most in at least 18 years and builders broke ground on the fewest houses since record-keeping began as the recession deepened, government reports said yesterday. Prices in November declined 8.7% y-oy, the biggest drop in records going back to 1991, the Federal Housing Finance Agency said yesterday. Housing starts fell 16% last month to an annual rate of 550,000, the lowest since the government started compiling statistics in 1959, the Commerce Department said. Record foreclosures and the highest jobless claims in 26 years are dragging down home prices as the economy enters the second year of a recession. (Bloomberg)
* * * * *
The number of Americans filing first-time claims for unemployment benefits matched the highest level in 26 years as firings forced more workers to seek government assistance in a deepening recession. Initial jobless claims increased by 62,000 to 589,000, more than forecast, in the week ended Jan. 17, from a revised 527,000 the prior week, a Labor Department report showed yesterday. Employers who cut 2.6m U.S. jobs last year may continue to shed workers, weighing on spending and prolonging the slump. President Barack Obama is pushing for quick passage of a stimulus plan that aims to revive the economy and save or create as many as 4m jobs. (Bloomberg)
* * * * *
European industrial orders fell by the most on record in November as the recession curtailed manufacturers’ demand for new machines and equipment. Industrial orders in the euro zone declined 26% y-o-y, the European Union statistics office said yesterday. That was the biggest drop since the euro was introduced a decade ago and exceeded economists’ median estimate for a drop of 20% in a Bloomberg News survey. Europe is being dragged into its deepest recession since World War II as the credit shortage derails purchases of homes, cars and factory machinery. (Bloomberg)
* * * * *
French consumer spending on manufactured goods dropped more than economists expected in December as the slump worsened in Europe’s third-largest economy, sending unemployment higher. Such spending, which accounts for about 15% of the economy, declined 0.9% m-o-m, Insee, the national statistics office said yesterday. Economists expected a 0.2% decline, the median of 20 estimates in a Bloomberg survey showed. From a year earlier, spending fell 1.7%, after a 1.1% gain in November. (Bloomberg)
* * * * *
China’s economy expanded at the slowest pace in seven years as the global recession dragged down exports, increasing pressure for more government spending and lower interest rates to buoy growth. Gross domestic product grew 6.8% y-o-y in 4Q08, after a 9% gain in 3Q08, the statistics bureau said yesterday. The figure matched the median estimate of 12 economists surveyed by Bloomberg News. Plummeting Chinese demand for parts and materials for exports is reverberating across Asia and the Pacific, driving Taiwan, South Korea and Australia closer to recessions and worsening Japan’s slump. (Bloomberg)
* * * * *
Singapore cut corporate taxes for the second time in three years and said it will tap its reserves to fund record spending amid efforts to drag the island’s economy out of its deepest recession since independence. The government will reduce the maximum tax rate payable by companies to 17% from 18% this year, Finance Minister Tharman Shanmugaratnam said in a budget address yesterday. It will spend S$20.5bn (US$13.7bn) on property and personal tax rebates and cash handouts to help businesses and workers, using S$4.9bn of its national reserves. The tax cut will narrow Singapore’s gap with Hong Kong as Prime Minister Lee Hsien Loong’s government aims to attract investment in services and manufacturing industries. (Bloomberg)
* * * * *

January 28, 2009 at 4:38 am 1 comment

Telekom Malaysia : To manage national emergency lines

· About MERS 999 Project
TM yesterday announced the acceptance of a Letter of Award (LoA) from the Government for the implementation of the Malaysian Emergency Response System 999 (MERS 999 Project) worth RM334.05m whereby TM will build and manage the project for 3 years effective from May 2007 until June 2010. We understand from management that work has already  been done on the project since last year, and they expect to formally sign an agreement soon.
The project is an Integrated Emergency Response System that will consolidate four emergency services with the capability to automate the filtering of crank and prank calls, thus improving efficiency and response time of emergency services in Malaysia.
· Earnings impact unclear; likely to be marginal
As the agreement has not been signed, management could not provide guidance on the profit margins of the project. More details will only be known once the agreement has been entered into, by which we will revise our earnings estimates from FY09 to FY10 upwards. Nonetheless, we expect minimal impact to earnings. Assuming an arbitrary but reasonable net profit margin of 10%, the proforma impact on EPS in FY09 and FY10 is marginal at only 2%-3%.
· Maintain HOLD, TP unchanged at RM2.74
We maintain our HOLD call and target price at based on DDM (Dividend Discount Model), as the earnings impact is small and does not affect our dividend assumptions which are the key drivers of our valuation. Our DDM valuation is premised upon a WACC of 7.6% and long-term growth rate of 0.5%. We have assumed that the company will pay RM700m p.a. in dividends until perpetuity, and thus believe our target price is a base case valuation given the potential upside of higher dividend payouts (90% of normalised PATMI) should TM’s operating performance exceed our expectations. Key risks to our target price are (1) less than RM700m p.a. dividend payout and (2) acceleration of fixed-to-mobile migration trend.

January 28, 2009 at 4:21 am 1 comment

Tenaga Nasional : Proposal to take over operations at Bakun

· TNB to work with SEB
Tenaga Nasional Bhd (TNB) and Sarawak Energy Berhad (SEB) have obtained Government approval to take over the operations of Bakun Hydroelectric Project (BHEP) from Sarawak Hidro Sdn Bhd (SHSB).
· Project details
The project will see TNB and SEB taking over the operations of 8x300MW generating units at BHEP, which are currently nearing completion. The scheme will then export a large part of the power generated to Peninsular Malaysia via a high-voltage direct current (HVDC) transmission system and the remaining power to Sarawak.
· Details of the takeover
BHEP is currently owned and developed by SHSB, a fully-owned subsidiary of the Minister of Finance Inc (MOFI). Upon commissioning of the units, A Special Purpose Vehicle (SPV) will then be set up to take over the operation of BHEP from SHSB through a leasing agreement and other
related commercial agreements for the sale of electricity to Peninsular Malaysia and Sarawak.
· Maintain call and TP
It is unclear at this point the income it can derive from the project and also the cost of laying down the undersea cables. However, the impact of this project will only be seen on TNB’s books from 2012 onwards, when the cabling works start. For now we maintain our buy call on the stock and maintain our TP of RM6.75

Proposal to Take Over Operations of BHEP

TNB to work with SEB
Tenaga Nasional Bhd (TNB) and Sarawak Energy Berhad (SEB) have obtained Government approval in principle to take over the operation of Bakun Hydroelectric Project (BHEP) from Sarawak Hidro Sdn Bhd (SHSB).
The takeover of operations will involve a leasing agreement to develop the associated transmission system from Sarawak to Peninsular Malaysia. The Board of Directors of both companies have resolved to proceed with the Project and commence the negotiations with the relevant authorities.

Project details
The takeover will see TNB and SEB taking over the operations of 8x300MW generating units at BHEP, which are currently nearing completion. The scheme is expected to export about 1,600MW from BHP to Peninsular Malaysia via a HVDC transmission system and the remaining power will be channelled to Sarawak.

Details of the takeover
BHEP is currently owned and developed by SHSB, a fully-owned subsidiary of the Minister of Finance Inc (MOFI). SHSB will continue to undertake the development of BHEP until full commissioning of the units.
A Special Purpose Vehicle (SPV) will then be set up to take over the operation of BHEP from SHSB through a leasing agreement and other related commercial agreements for the sale of electricity to Peninsular Malaysia and Sarawak. The SPV will be owned by TNB, SEB and the Sarawak State with MOFI holding a golden share.
Apart from that, a joint venture company (JV) owned by TNB, SEB and MOFI will be set up to undertake the development of the undersea transmission facilities. The on-land transmission systems for Peninsular Malaysia and Sarawak will be developed by TNB and SEB respectively.

Maintain call and TP
There have been no concrete details released at this point in time. It is only known that TNB will takeover the operations of BHEP via an SPV, and that the group will be involved in the development of the undersea transmission facilities. We have been told that TNB will retender the laying of the undersea cables with the hopes of getting a better price this time around.
It is unclear at this point the income it can derive from the project and also the cost of laying down the undersea cables. However, the impact of this project will only be seen on TNB’s books from 2012 onwards, when the cabling works start.
For now we maintain our buy call on the stock and maintain our TP of RM6.75

January 22, 2009 at 7:26 am Leave a comment

Banking : Double reduction again

· Most aggressive move yet
Bank Negara Malaysia, in its most aggressive move yet, reduced the OPR and SRR rates by 75bps and 150bps to 2.5% and 2.0% respectively in the Monetary Policy Committee meeting yesterday. Ceiling and floor rates have been for the OPR are correspondingly reduced to 2.75% and 2.25% respectively. The move was certainly unexpected, with market expectations of a 25-50bps cut, and could possibly point to a rapidly weakening economic environment.
· Margins obviously impacted
As to be expected, margins will obviously be impacted negatively as lending rates will be repriced downwards by a larger quantum than deposit rates. We estimate that banks’ earnings will be impacted by 5-13% on the assumption that BLR will be reduced by the similar quantum as with the OPR cut while deposit rates will be lowered by an average of 35-40bps. The key to a more concrete revision in estimates is management’s repricing decision, with net margins possibly being squeezed even further should deposit rates be repriced down by a lesser quantum.
· Net impact negative
While net interest margins will obviously be impacted, more so for the banks with larger exposures to variable rate loans, the fairly sizeable reduction in SRR rates will cushion this impact somewhat as financial institutions will now be able to generate additional interest income from the “released” funds. Based on the total statutory reserves of RM22.5bn in the banking system as at November 2008, the reduction in SRR will return additional funds of about RM9.7bn and could possibly earn banks approximately RM290m based on average yields of 3%. The cumulative positive impact to stocks under coverage from the SRR reduction will range between 1-2%, but will still result in a net negative impact when taking into account the sharp reduction in OPR.
Maybank and Bumiputra-Commerce will see net earnings for FY09-FY10 possibly reducing by 10-12% given their higher exposure to variable rate loans. Hong Leong Bank and Public Bank will see earnings come off by 4- 8% while AMMB Holdings will be the least affected, with earnings hardly changed given their large composition (65%) of fixed rate loans.
· Reduction in earnings and target prices
The resultant effect of the earnings changes above will be reductions in valuations and target prices for all stocks under coverage, by an average of 5-12%, which we will effect immediately though respective management’s decisions on the re-pricing of deposits are unknown as yet. We continue to favour Public Bank for its attractive dividend yields and strong management, AMMB Holdings and Bumiputra-Commerce Holdings for stronger recoveries upon improvement in market conditions. Hong Leong Bank is downgraded to a Hold.

January 22, 2009 at 7:06 am Leave a comment

22 January 2009 Newz Bits

TALKING POINT


Double reduction again on OPR and SRR

Bank Negara Malaysia, in its most aggressive move yet, reduced the OPR and SRR rates by 75bps and 150bps to 2.5% and 2.0% respectively in the Monetary Policy Committee meeting yesterday.
The move was certainly unexpected, with market expectations of a 25-50bps cut, and could possibly point to a rapidly weakening economic environment. The resultant effect of the net interest margin contraction are negative changes to earnings, valuations and target prices for all banking stocks under coverage, by an average of 5-12%, which we effect immediately though the
decision of respective banks’ managements as to the re-pricing of deposits are yet to be known. We continue to favour Public Bank for its attractive dividend yields and strong management, AMMB Holdings and Bumiputra-Commerce Holdings for stronger recoveries upon improvement in market conditions. Hong Leong Bank is downgraded to a Hold.

HIGHLIGHTS


On Malaysia

· Inflation falls more than expected in December
· RAM: Budget deficit is expected to surpass 5% for next 2 – 3 years
On The Global Front
· U.K. unemployment rises at the second fastest pace since 1991
· Singapore’s economy shrinks the most on record in 4Q08
REPORTS
· Banking – Double reduction again (Neutral)
· Tenaga – Proposal to take over operations at Bakun (Buy; RM6.00; TP: 6.75)

Gamuda Bhd (GAM MK, Buy, TP: RM2.28), is taking an “active but selective” approach when bidding for construction projects in the gulf states despite the good reputation of the oil rich nation, its Senior General Manager KW Chan said yesterday. He said the company was bidding for the second phase of the Dukhan Highway for which the tender would be out next month. The contract is worth more than RM1bn. Besides tendering in Qatar and Bahrain, the company was also eyeing potential construction projects in Dubai and Abu Dhabi. “We will be active in the Middle East, but we are taking a selective approach when bidding for projects to keep up with our good reputation,” he added. (BT)
* * * * *
Parkson Holdings Bhd is maintaining its China expansion plans this year in spite of a potential slowdown in consumer spending as a global economic downturn has pushed the country’s urban unemployment rate soaring to 4.2%, the first time in 5 years. MD Tan Sri William Cheng said that they were still expecting strong growth from China. Last year, retail sales from the China business grew 27%. The plan is to open another 10 outlets in China. (Financial Daily)
* * * * *
Sarawak Aluminum Co, a JV between Rio Tinto Alcan and Cahaya Mata Sawarak Bhd – is in advanced negotiations with Sarawak Energy Bhd on the supply of power to its proposed US$3bn aluminum smelter project in Samalaju Industrial Park, Bintulu. Rio Tinto business development Asia director Matt Liddy, however, gave no indication on when the negotiations could be concluded. Liddy said the power would come from Bakun hydroelectric dam, which could generate up to 2400MW. He said Rio Tinto was expected to make an investment decision on the project in 12 months as it has to first ensure the power supply and other necessary infrastructure, like the proposed port, would be in place. (StarBiz)
* * * * *
Inflation fell by more than expected to a seven-month low in December, driven by lower fuel prices, and economists expect it to drop further. The consumer price index (CPI) rose 4.4% y-o-y. Food prices softened for the third consecutive month to 10.4% y-o-y. Transportation costs also declined by 0.3% y-o-y in December from 6.1% previously and a peak of nearly 22% in July last year. According to the Statistics Department, the CPI grew by 5.4% to 111.4 in 2008. (BT)
* * * * *
The country’s budget deficit is expected to surpass 5% for the next two to three years, as the government may need to pump more capital into the economy that is feared to be on the brink of recession, an economist said. “Although the budget deficit is likely to widen to beyond 5% for the next two to three years, it is not as great a concern for the time being, as the bigger worry is a downward spiral in the economy, in view of a synchronised recession globally,” RAM Holdings Bhd chief economist Dr Yeah Kim Leng said yesterday. He added that a widening deficit would not be seen as an imprudent measure as long as it could sustain economic growth and prevent the country from falling into a sharp and prolonged recession. (Financial Daily)
* * * * *
The government’s proposed second stimulus plan should focus on manufacturing and construction as the economic downturn has led to a series of job cuts in these sectors, Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) president Tan Sri William Cheng said. Some 47% of respondents polled by ACCCIM planned to cut their workforce, while about 65% of those respondents involved in the manufacturing sector were mulling job cuts. (Financial Daily)
* * * * *
The US-Malaysia Free Trade Agreement (FTA) is to be fast-tracked under the administration of new US President Barack Obama, US Ambassador to Malaysia James R Keith said yesterday. He said the FTA will be finalised after the officials in charge of trade negotiations have been appointed under the new administration. “The US commitment on the FTA will remain as this is important for Malaysia’s economic growth and for US companies investing in Malaysia,” Keith said at the US Presidential Inauguration Party. (Financial Daily)
* * * * *
New motor vehicle sales are expected to plunge below the half million mark, dropping 12.4% to 480,000 units in 2009, mainly due to unfavourable consumer sentiment on the back of the economic downturn, said Malaysian Automotive Association (MAA). MAA president Datuk Aishah Ahmad said other factors that led to the projected decline in total industry volume (TIV) included lowered used car resale values. (Financial Daily)
* * * * *
The prices of vehicles are expected to increase due to the exchange rate losses incurred by automotive players as a result of the weakening ringgit, said Malaysian Automotive Association (MAA). MAA president Datuk Aishah Ahmad said most of the members of MAA were losing out in terms of exchange rate. She said although fuel prices had gone down slightly, cost of goods like food items had not come down. Aishah added that most of the members were holding back from increasing prices at the moment. (Financial Daily)
* * * * *
Fraser & Neave Holdings Bhd (F&N) hopes to achieve a single-digit growth in revenue this year. The company reported a record revenue growth last year, as revenue rose 25.3% to RM3.59bn for the year to September 30 2008. “In view of the overall weak consumer sentiment, we are not pessimistic but we remain realistic in our target,” said chief executive officer Tan Ang Meng after the group’s annual general meeting in Kuala Lumpur yesterday. (BT)
* * * * *
Bursa Malaysia’s benchmark index, the Kuala Lumpur Composite Index (KLCI), will be known as FTSE Bursa Malaysia KLCI from July 6 as the local bourse adopts the FTSE global index standard to ensure that it remains globally relevant. The FTSE Bursa Malaysia KLCI will comprise only the largest 30 main board companies based on investable market capitalisation, instead of the current 100. The index value will remain unchanged and will adopt the KLCI index closing value
on Friday, July 3. Exchange- traded products now tracking the KLCI and FTSE Bursa Malaysia Large 30 Index will also move into the FTSE Bursa Malaysia KLCI. (BT)
* * * * *
Stocks rallied Wednesday, recovering most of the previous session’s losses, as investors welcomed IBM’s earnings and scooped up bank shares hit hard in the recent retreat. The Dow Jones industrial average gained 3.5% (+279.0 pts, close 8,228.1), again reclaiming the 8,000 level. The Standard & Poor’s 500 index rose 4.3% (+35.0 pts, close 840.2) and the Nasdaq composite added 4.6% (+66.2 pts, close 1,507.1). In currency trading, the dollar fell against the euro and the yen. U.S. light crude oil for March delivery rose US$2.71 to settle at US$43.55 a barrel on the New York Mercantile Exchange. (Bloomberg)
* * * * *
President Barack Obama’s economic team is pushing to complete a bank-rescue plan that can be twinned with the US$825bn stimulus package being negotiated with Congress to alleviate the rapidly deepening financial crisis. While full details of the rescue haven’t been settled yet, people familiar with the deliberations said the package is likely to include a US$50bn-plus program to stem foreclosures, fresh injections of capital into the banks and steps to deal with toxic assets
clogging lenders’ balance sheets. In his inaugural address Tuesday, Obama called for “bold and swift” action to resolve the crisis that’s cost the economy almost 2.6m jobs last year, the most since 1945. (Bloomberg)
* * * * *
European Central Bank (ECB) President Jean-Claude Trichet said credit-rating downgrades and worsening public finances in some euro-region countries are not threatening to break up the decade-old monetary union. He said in a very vast continental economy, it is not abnormal to have diversity. Standard & Poor’s this month downgraded the sovereign credit ratings of Spain and Greece and said the ratings of Ireland and Portugal are under threat. Bond yield spreads between the strongest and weakest euro-region economies have ballooned as the global financial crisis pressures budgets, making the ECB’s one-size-fits-all monetary policy less effective. (Bloomberg)
* * * * *
U.K. unemployment rose at the second-fastest pace since 1991 in December as the worsening recession prompted retailers and automakers to cut jobs. The number of people receiving jobless benefits rose 77,900 to 1.16m, the highest level since January 2000, the government’s statistics office said yesterday. Economists had expected an increase of 81,000. The losses pile pressure on the Bank of England to cut the key interest rate from the current 1.5%. (Bloomberg)
* * * * *
Bank of England Governor Mervyn King said officials may start buying assets within weeks to loosen credit markets as the lowest U.K. interest rates since 1694 fail to avert a “marked” recession. The central bank may acquire securities such as corporate bonds and commercial paper to bolster lending to companies and consumers as banks rebuild balance sheets damaged by the global financial crisis. The bank said yesterday officials opted not to cut its key rate by one percentage point this month on concern it might unsettle markets. (Bloomberg)
* * * * *
Singapore’s economy shrank the most on record in 4Q08 and the government forecast a 5% contraction this year and a possible 1% fall in consumer prices, which may prompt a one-off currency devaluation. Government data showed 4Q08 gross domestic product (GDP) shrank at a deeper-than-expected and seasonally adjusted rate of 16.9%, the biggest fall on record and the third consecutive quarterly contraction. GDP fell 3.7% on a y-o-y basis. That left 2008 growth at just 1.2%, an abrupt turnaround from a 7.7% expansion in 2007 when the stock market, financial services and property prices were booming. A government declaration that the economy was suffering its worst ever recession and official forecasts of a continued slump suggests the central bank could push down the centre of the trading band for the Singapore dollar, effectively devaluing it to help the key export sector. (Reuters)
* * * * *
India ruled out import taxes on crude palm oil as prices of domestic oil seeds stay above the assured rates the government pays farmers. Domestic oilseed prices are rising, Farm Minister Sharad Pawar told reporters in New Delhi yesterday. India’s plans to extend duty free imports may help support this month’s rally in palm oil prices in Malaysia. (Financial Daily)
* * * * *
Foreign direct investment (FDI) in developing nations will drop by US$180bn (RM642.6bn), or 31% this year as a global recession prompts the multinationals to cut spending on factories and mines, according to the World Bank. The decline will put a renewed pressure on emerging market currencies, even as asset sales by fund managers slow, said Mansoor Dailami, manager of international finance in the global development prospects group. (Bloomberg)
* * * * *

January 22, 2009 at 6:54 am Leave a comment

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