Malaysia Business News

PDZ: Tan Sri Halim Saad will likely emerge as the controlling shareholder in loss making container shipping firm by end 2014 and lead its transformation into an oil and gas player.



Sources say that a share transfer deal has been signed between PMB and Halim, but the 30% block held by PMB will be crossed in over three months from Aug 2014.



In early Aug 2014 it was reported that Halim is eyeing the controlling stake in PDZ at a price at least 50% more than the 18 sen per share paid by PMB or 27 sen per share.



PDZ says it was not directly aware of any such developments and its directors and major shareholders were not involved in any negotiations with any party at that juncture.



However PDZ on Aug 21 2014 in response to a media report, says its major shareholder has been approached by several parties which expressed their intention to purchase the stake in the company and discussions are ongoing with the relevant parties with regard to the sale.



It was reported that PDZ has a relatively healthy balance sheet with rm200 million in sales, rm24 million cash balance and rm6 million to rm7 million in borrowings.



It was also reported earlier that Halim will inject several of his O&G outfit into PDZ to further transform the company into an O&G player.


Malton: Its chairman DAtuk Desmond Lim is believed to be streamlining privately owned assets, which could see him inject all properties at PBD in KL into the listed entity.



Sources say Lim, also chairman of the Pavilion REIT, is expected to inject the PBD redevelopment project, which has an estimated GDV of up to rm3 billion into Malton by end 2014.



Sources say the asset injection is likely to be in the form of a share swap, which will result in Lim obtaining more shares in Malton.



The asset injection will be of a bigger plan for Lim to consolidate his PBD assets under Malton and does not discount the possibility of his parking the future office blocks and shopping mall in PBD in the Pavilion REIT, of which he and his wife Tan hold a combined stake of 37.45%.



In March 2014, Lim secured a 2.57ha tract in PBD via Jendela Mayang Sdn Bhd for rm450 million. Lim already owns 3.88ha in PBD via his Impian Ekspresi Sdn Bhd.



With the two parcels, Lim owns about a third of the 18.6ha.



As such Malton, in which Lim has a 37.9% stake is said to be raising money for a multibillion ringgit redevelopment via a share placement exercise.



It was reported that Malton has appointed a broker for the exercise, expected to raise some rm40 million equivalent to a placement price of rm1.10.



Its net asset value per share is rm1.55. Its total borrowing stood at rm397 million.



Rail connectivity will be crucial in connecting Pavilion KL to Pavilion 2 and possibly Lim’s third mall in Bukit Jalil expected to be linked to an MRT line.



The Pavilion in Bukit Jalil will be an integral part of a joint venture between Malton and Ho Hup on a 24.28ha siate with a GDV of rm4 billion. Malton is supposed to develop 20.23ha while Ho Hup will develop the remaining 4.05ha.



Lim could inject the Bukit Jalil Pavilion into the Pavilion REIT once the mall is completed and its rental income stabilizes.



Malton has three projects in the pipeline worth rm7.9 billion at Bukit Jalil, Batu Kawan in Penang and in Pengerang, Johor.

 

The encouraging 1HFY2014 numbers were mainly on account of higher revenue contributed by MRCB’s property development division. The higher earnings figure was particularly contributed by the improvement in the pace of progress on its ongoing property development projects.

Observers expect it to regain its upward trajectory from FY2015 onwards.

The group have completed several acquisitions – that is, acquiring the balance 51% equity interest in Penang Sentral Sdn Bhd and 40% in Excellent Bonanza Sdn Bhd.

In addition, now (Aug 2014) that MRCB can acquire the remaining 30% stake in PJ Sentral Development Sdn Bhd, it has greater earnings visibility moving forward.

Perdana: Some 88% of its offshore support vessels are on long term charters with their utilization levels being sustained at more than 90% from 2014 to 2016.

Perdana has one of the youngest fleet profiles in the domestic market, averaging 4.5 years and it is the largest AWB player in the region.

Expansion wise, it will take delivery of one 300 pax AWB by 4QFY2014 which is targeted for Shell’s chemical enhanced oil recovery job and two 500 pax AWBs in 1H2016. It has option to add tow more 500 pax AWBs in 2H2016.

Perdana’s net debt/gearing stood at rm546 million or 0.9 times as of June 2014. It is currently (Aug 2014) focusing on growth over maintaining its syariah compliant status. It has been reported that Perdana’s syariah compliant status may be removed at the next review in Nov 2014 by SC.

If that happens, its major shareholder LTH will likely have to sell down its 8.6% stake to another existing shareholder Dayang Enterprise (currently owns a 24.5% stake), which will trigger a GO.

Overall it is a growth stock (34% three year net profit compound annual growth rate) with undemanding valuations and an alternative to Ezion Holdings Ltd for a brownfield development play.

 

Sources said one of the routes being considered currently (Aug 2014) is for CIMB to sell its entire banking business to RHBCap to be paid by an issuance of new RHB Cap shares.

Once RHBCap takes over CIMB Group’s banking assets, the commercial and investment banking businesses of both groups will be consolidated.

As part of the step by step merger, RHB Islamic will subsequently sell its entire business, in  exchange for shares, to CIMB Islamic Bhd which will end up being the vehicle for the merged Islamic banking businesses.

The last step will see the EPF, which owns 64.6% stake of MBSB, making an offer to take out the minority shareholders and once that is done, MBSB’s businesses will be injected into the enlarged Islamic bank.

Sources said this route to merger is preferred over an outright purchase of RHBCAP of its assets as this will likely be blocked by Aabar Investments, which had made clear its objection to any sale unless it is a price it is happy with.

In order for RHBCap to push through a sale of assets, it will need support from 75% of its shareholders, Aabar owns 21.2% of RHBCap.

On the other hand, RHBCap will need only 50% plus one share from its shareholders to buy CIMB Group’s business.

If the merger takes place as proposed, the EPF will end up as the single’s largest shareholder in the merged entity with a 22.3% stake followed by Khazanah Nasional with 20.8% stake.

The other substantial shareholders will be Aabar with 6.1% stake, Mitsubishi UFJ with 3.3% stake and OSK Holdings with 2.8% stake.

Malton: It is undertaking a private exercise to raise funds for upcoming projects. It is expected to raise some rm40 million or a placement price of rm1.10.

Institutions like Malton but the share price is volatile and they cannot get enough shares.

Observers had ascribe a fair value of around rm1.70 give its strategic landbank. Its latest reported NAV stood at rm1.55 a share.

Its net cash in operating activities stood at rm32.3 million as at March 31 2014 versus rm193 million a year ago while its total borrowings stood at rm397 million.

It is posed to play a bigger role in the development of Damansara Tow Centre, expected to be completed over seven or eight years from 2014.

It also has three projects in the pipeline worth rm7.9 billion at Bukit Jalil, Batu Kawan in Penang and Pengerang in Johor. Malton will be building a shopping mall worth rm3.5 billion in Bukit Jalil.

RHBCap: Sources say the merger between CIMB, RHBCap and MBSB could see RHBCap’s Investment banking unit up for sale.

Speculation is rife whether the buyer could be a local bank. The interested buyer are likely Public Bank and Affin Bank.

 

Its passenger load factors (number of seats filled) remain strong, Philippines and Indonesia is going to be profitable in the 4QFY2014. Its Indonesia had swung into a net loss of rm102.35 million for the financial year ended Dec 31 2013 compared to a net profit of rm52.5 million in the previous year, despite higher revenue.

Its fourth quarter looks very strong.

It is due to announce its financial results for the second quarter ended June 30 (2QFY2014) on Aug 20 2014.

Fernandes rubbished rumors that Airasia has plans to acquire MAHB’s assets and MAS.

PMBTECH: Its share price has been climbing steadily from rm0.70 in Jan 2014 due to the rise in aluminium prices.

Aluminium prices have risen 4.25% year on year to an average USD2168 per tone in the second quarter 2014.

It posted a net profit for its second financial quarter ended June 2014 to rm1.9 million from rm1.63 million a year ago on stronger contribution from its construction and fabrication divisions, which designs and fabricates aluminium curtain wall, cladding systems and system formwork.

PMBTech’s major shareholder PMetal’s 2QFY2014 net profit almost tripled to rm60.03 million from rm20.04 million a year ago on optimum production at its smelting plants and higher aluminium prices.

SUmatec: Talk that its largest shareholder Tan Sri Halim Saad is increasing his stake in the company and is close to exciting its PN17 status.

It had completed a private placement of up to 308.6 million new shares in the firm to independent third party investors. This will result in Halim’s stake being diluted to some 20%. As such he is looking to increase his stake in the company by up to 32% without triggering an MGO.

It had proposed a private placement exercise in Jan 2014 to fund the company’s planned acquisitions of oil and gas fields in Kazakhstan.

The private placement was completed following the listing of and quotation of 308.6 million new shares of 14 sen per share in Sumatec on Aug 5 2014. The company will raise some rm85 million from the exercise.

PDZ: It has denied news reports indicating that the shipping firm was in discussions with certain parties to acquire assets and undertake corporate exercises in Indonesia or Malaysia.

PDZ said the potential assets were part of the company’s business plan formulated in general terms. The plan might involve fund raising exercises, including a rights issue.

There are no negotiations taking place pending completion of the due diligence on the potential assets save for negotiations for the acquisition of 20% stake in Efogen Sdn Bhd.

Nevertheless it was keen to explore potential acquisitions or exercises that would enhance shareholder value.

Meanwhile Pelaburan Mara Bhd reduced its shareholding in PDZ Holdings Bhd following the disposal of five million shares on 11 Aug 2014. It sold the shares in an off-market deal at 22.5 sen a share. After the disposal, its shareholding was reduced to 256.048 million shares or 29.54% based on the paid-up of 896.321 million shares.

 

Industry observers do not expect a significant shift of interest from REITs to other fixed income investments such as government bonds as bond yields are unlikely to move in tandem with an OPR hike given the sustained foreign interest in them.

People perceive that when the OPR goes up the bond yield would go up as well. But interestingly, when BNM increased the OPR to 3.25% in July 2014 the bond yield of MGS actually went down to 3.88%.

Compared the situation with that what happened in 2009 when BNM trimmed the OPR by 75 basis points to 2.5% to boost economic growth. The MGS bond yield went up after that and in 2010 when the BNM increased the OPR again, the MGS bond yield dropped.

The borrowings of most M-REITs also lean towards fixed rate loans. So if BNM were to raise the OPR by another 25 basis points, earnings for these REITs would not be significantly affected.

QUILL Capita and Pavilion REIT and IGB REIT would be the least affected as close to 100% of their debts are at fixed rates.

Investors are advice, apart from looking at valuations should also study the property segments and the asset quality the REIT carries as that will determine earnings prospects.

Earlier 2014, there was a sudden surge in the yield of the 10 year MGS bond as the QE easing in Europe tapered off causing a selldown of all local REITs.

But it has since stabilized and started trending down since Feb 2014 despite the OPR hike in July 2014. It could be due to strong foreign as well as domestic demand.

Going forward, the M-REIT sector lacks strong re rating catalysts.

Most of the M-REITs are averaging 6%.

Puncak Niaga: It is among four parties short listed by Petronas for the supply of water pipes to the Pengearng Integrated Complex in Pengerang, Johor. The contracts is worth about rm300 million.

Puncak Niaga has been busy scouting for water related construction jobs. The group has secured rm544 million worth of construction job for 2014.

It is believed that Puncak Niaga stands a good chance of securing the Pengearng job given its expertise in water related construction business. Along with its oil and gas business, its construction arm would help to sustain its earnings as it exits the water concessionaire business upon the completion of Selangor’s water restructuring exercise.

Part of the rm1.55 billion proceeds from the sale of its Selangor water assets are expected to be utilized for the expansion of its oil and gas business. There is also a possibility that Puncak Niaga may venture into the plantation business. As such do not expect the entire proceeds to be dished out as special dividends to shareholders.

Gamuda: It has entered into a share sale agreement with Salak Park Sdn Bhd for the acquisition of the latter’s entire stake in Salak Land Development Sdn Bhd for a total cash consideration of rm784 million.

This is another positive move by the group to improve its bottom line prospects after having increased its stake in Kesas Holdings Bhd whch is the toll concessionaire for the Shah Alam Expressway.

Management is of the view that the proposed acquisition will enable Gamuda to further establish its position in property development and increase its investment property portfolio to provide long term earnings growth.

The proposed acquisition will also increase its undeveloped land bank to 3846 acres.

Currently (Aug 2014) Gamuda has cash in hand of rm1.3 billion and a low net gearing of 0.21 times to finance the acquisition.

Its outstanding order book is more than rm2 billion of which potential order book replenishment from Southern Double Track in 2015 and KVMRT Line 2 in 2016 and strong unbilled property sales of rm1.8 billion.