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Monday, September 29, 2014

AirAsia X a ‘buy’, says MIDF (BT)

MIDF Research expects more rational competition among airlines as fare yield recovers and cheaper jet fuel raises operators’ bottom line.

The firm said after the excessive capacity expansion since mid-financial year 2013, fare yield is expected to recover in the fourth quarter of 2014.

Malaysia Airlines’ (MAS) restructuring, it added, should lead to industry-wide yield revival.

“MAS may cut 10-15 per cent of its routes possibly by the end of FY14 (financial year). As such, we view that the capacity cutback may help trigger industry-wide yield recovery after the excessive capacity expansion in 2013.

“Moreover, Indonesia agreed to open up Jakarta for Asean open sky. Under the agreement, Asean airlines are allowed to fly without capacity and pricing restrictions to Jakarta,” MIDF Research said in a report yesterday.

This will allow for higher traffic growth and cheaper fare among the Asean capital cities.

“Manila has yet to join the air liberalisation agreement, but we are confident that it will follow suit before the deadline of December 2015.”

It noted that another four cities in Indonesia, namely Medan, Surabaya, Denpasar and Makassar, are set to liberalise their aviation market.

“This would be the game-changer for the regional airlines as it allows for the opening up of new routes,” MIDF Research said.

Airlines will also benefit from lower fuel bills in view of the easing jet kerosene price.

“Jet fuel bill may ease on lower average price. Industry report suggested that the slump in crude oil price was due to mixed factors, notably the ampleness of United States shale oil supply and the weaker China growth prospects.

“Most of global airlines have reduced their fuel hedging exposures in reaction to the falling price and waning volatility in crude oil market. As the peak travelling season in the final quarter looms, we expect the domestic carriers to benefit from lower fuel expenditure should the trend continue,” it added.

MIDF Research has reaffirmed its “neutral” stance on the sector with AirAsia Bhd the top pick.

It rated AirAsia X a “buy”, but was “neutral” on MAS and MAHB.

Yu picks up shares in MUI (Edge)

Tan Sri Khoo Kay Peng’s Malayan United Industries Bhd (MUI) has received a well-regarded investor just as the group is said to be exploring the divestment of its crown jewel in London to unlock value.

MUI’s 2013 annual report, published on June 4, 2014, listed Datuk Dr Yu Kuan Chon as one of its top 30 shareholders, with 44.63 million shares or a 1.53% stake as at April 28, 2014. Yu’s name did not appear anywhere in MUI’s 2012 annual report, which means he could have purchased the shares between the second half of 2013 and earlier this year.

The value of Yu’s holdings is small at RM11.4 million, based on MUI’s share price of 25.5 sen last Friday, but the fact that it is held by Yu has turned heads.

Yu, who is chairman of YNH Property Bhd, is regarded as a shrewd investor. He managed to block an attempt by tycoon Tan Sri Quek Leng Chan to privatise Hong Leong Capital Bhd (HLCap) last year, as he believed the value of HLCap was higher than what Quek had offered.

Now, Yu’s investment in MUI, a diversified group of which Khoo owns 47.67%, has managed to stir interests. Although MUI is still barely profitable, its share price rose from a trough of 19 sen in June this year to as high as 28.5 sen last month.

Market sources familiar with MUI said Yu could have been attracted to the inherent value in the group.

For instance, MUI’s Corus Hotel in Jalan Ampang, sitting on 78,500 sq ft of prime land opposite the Petronas Twin Towers, is carried at a net book value (NBV) of only RM60.5 million, or RM770 per sq ft (psf), whereas land in the KLCC vicinity had reached as high as RM3,000 psf.

Nevertheless, the main appeal of MUI lies in its chain of hotels in the United Kingdom that have not been revalued for many years.

Notably, its crown jewel, the 390-room hotel known as Corus Hotel Hyde Park at Lancaster Gate, London, which sits on 21,640 sq ft of freehold land, is carried at a NBV of only RM257.5 million. MUI acquired the property in 2001.

It would appear that Khoo is finally looking to sell Corus Hotel Hyde Park. According to an article posted on a UK property news website in July, MUI is said to have appointed Debutesq Group, a luxury real estate firm, to sell the property for £200 million (RM1.06 billion).

If the sale materialises, analysts said, the “surplus” of close to RM800 million could serve to pare down MUI’s total borrowings of RM893.5 million as at June 2014, and “finally let its profits shine through”.

Such hefty borrowings, compared to the group’s total equity of RM762 million (excluding minority interests), resulted in a finance cost of RM52.6 million in the financial year ended December 2013, which wiped out a majority of MUI’s RM54.9 million operating profit.

Meanwhile, a surplus of close to RM800 million could also double MUI’s shareholders equity to RM1.56 billion or 53.3 sen a share, from 26 sen per share currently. MUI was traded at 25.5 sen last Friday, with a market capitalisation of RM747.8 million.

“Khoo is now 75 years old. It is a matter of time [before] he wants to unlock the value of assets in MUI, clean up its books, and leave a good legacy,” said an analyst, who added that MUI is also looking to dispose of some of the restaurants in the UK.

MUI owns and operates nine hotels and two restaurants in the UK and two hotels in Malaysia, most of which operate under the “Corus” brand.

Apart from the hospitality business, MUI controls 94.52% of department store operator Metrojaya Bhd, 35.17% of London-listed Laura Ashley Holdings plc (market capitalisation of £195.8 million), and major stakes in MUI Properties Bhd, Pan Malaysia Corp Bhd (foodstuff manufacturing), Pan Malaysia Holdings Bhd (diversified), Pan Malaysia Capital Bhd (stockbroking and financial services) and so on.

On its London assets, property market observers said it won’t be difficult for MUI to fetch £200 million for Corus Hotel Hyde Park, given upbeat investors’ sentiments on London hotels, especially with growing interest from wealthy Chinese investors as well as sovereign wealth funds in the Middle East.

According to a Hodges Ward Elliott report on “2013 European Hotel Transactions” dated March this year, the UK remained the most liquid hotel investment market, with transaction volume totalling £3 billion. ..

Interestingly, Tan Teng Boo’s had in a 2008 newsletter valued MUI’s Corus Hotel Hyde Park at a market value of close to RM600 million then.

MUI’s gearing has decreased over the years, total borrowings dropped from RM1.33 billion in 2009 to RM894 million as at June 2014, as Khoo commits himself to putting his house in order.

In MUI’s latest annual report, Khoo said he is confident the group “is on the right course as it continues to restructure its business model and strategy as well as pare down its bank borrowings to ensure a strong balance sheet”.

For Yu, it is not just MUI that he has shares in, as he is also holding shares in MUI’s listed subsidiaries, with a 2.41% stake in MUI Properties, 0.19% stake in Pan Malaysia Corp, and 5.46% stake in Pan Malaysia Holdings.

Market observers linked Yu’s “asset play” style of investment in MUI to his investment in Shangri-La Hotels (M) Bhd back in 2011, besides the more recent move on HLCap, which made him famous.

“Shangri-La’s share price gained some 160% since he (Yu) emerged as a substantial shareholder in 2011,” said a broker. ..

Ultimately, MUI has rich assets, but a long-overdue sum of RM392.9 million, which has been owed to the group for over 10 years by some parties, remains an issue in corporate governance.

In an update last month pertaining to the sum owed, MUI said the “liquidation of the debtors’ estates is still ongoing”, without further elaboration.

This article first appeared in The Edge Financial Daily, on September 29, 2014.

Saturday, September 27, 2014

Talam on stronger footing (Star)

TALAM Transform Bhd has returned to the path of financial stability after a debt rationalisation exercise which includes asset divestment programme, debt conversion into financial instruments and settlement of debts through contra of properties with creditors.

The disposal of some 6000 acres of development land and investment properties over the past decade has raked in close to RM2bil that helps to pare down its massive debts and steers the property group to rosier times ahead...

Efforts to revive the affected delayed projects by bringing in reputable contractors in the last seven years have borne fruit and to-date all the houses have been completed and delivered to their buyers, she adds.

Talam executive director, corporate affairs, Yaw Chun Soon says the debt rationalisation efforts are paying off, and despite headwinds and a softer property market, the efforts of unlocking the value of Talam’s landbank and assets has shored up Talam’s resilience and financial footing in the coming years.

By the second quarter ended July 31, 2014, Talam has substantially brought down its debts to RM1.2bil. Talam’s borrowings and loan stocks fell to RM254.475mil as at July 31, 2014, from RM435.53mil in financial year 2013 (FY13), while net current assets came to RM194mil against net current liabilities of RM220.11mil in FY13.

Talam posted a profit before tax of RM10.49mil for the period compared with a pre-tax loss of RM6mil in the second quarter of 2013. Group revenue rose to RM88.7mil from RM19.48mil previously. 

For the financial year ended January 31, 2014, it posted after-tax gains of RM7.98mil, a significant turnaround compared with the preceding year’s losses of RM20mil. Group revenue of RM216.72mil was an increase of 1.92%, compared with RM212.64mil in FY13. 

Yaw says the completion of the other incoming asset sales will further reduce Talam’s total debt level to around RM300mil, and in the near future the borrowings will come down to less than RM50mil.
“With this stronger financial footing, Talam will be able to undertake more value added and quality lifestyle projects. Moving forward, Talam is embarking on a build and sell concept for a few of its projects. 

“We are exploring ways of rationalising Talam’s structure and operations to enhance its efficiency and effectiveness of building and delivering quality property projects,” he adds.

Among others are that the group will be managed by professional executive directors Chua Kim Lan and Yaw Chun Soon. Yaw was formerly with TA Enterprise Bhd and joined Talam on July 24 this year. They will be assisted by the executive committee where the members comprise professional staff.

While Tan Sri Chan Ah Chye will become the controlling shareholder, he has indicated he will continue as a non-executive director only, and through the company’s board, will guide and nurture the new leadership of the group by providing advice and strategic input to the property group.

Talam has development plans worth a gross development value of RM5bil over a period of 10 years. Four development projects in Selayang, Ukay Perdana, Putra Perdana and Puncak Jalil with a gross development value of RM2bil to RM3bil are lined up for launch next year. It also has three ongoing joint ventures – Serenia Garden, Taman Puncak Jalil and Saujana Putra, worth a GDV of RM400mil to RM500mil.

PDZ cancels plan to buy 20% of O&G player Efogen (Edge)

PDZ Holdings Bhd has scrapped a plan to buy a 20% stake in Efogen Sdn Bhd, which the container shipping firm said would open doors for it to enter the oil and gas industry.

In a filing with Bursa Malaysia today, PDZ said both it and vendor Johany Jaafar had mutually agreed to terminate the share acquisition agreement. This came after three rounds of extension to satisfy the conditions of the agreement.

PDZ first announced in May that it plans to buy 20% of Efogen’s shares from founder Johany, for RM18 million in total. Johany holds 40% in Efogen, while the remainder is held by lawyer-turned-entrepreneur Tan Sri Abdul Rashid Abdul Manaf, who is also the Chairman of Eco World Development Group Bhd.

PDZ’s stock was up by half a sen or 1.64% today to close at 31 sen, bringing its market capitalisation to RM269.49 million.

Friday, September 26, 2014

Pelaburan Mara emerged in loss-making Asia Bioenergy Technologies Bhd (Edge)

Pelaburan Mara Bhd has emerged in loss-making Asia Bioenergy Technologies Bhd — a business incubator for biofuel producers.
A filing with Bursa Malaysia showed that Pelaburan Mara bought 18.32 million shares or a 2.18% stake in Asia Bioenergy on the open market, on Sept 17.

No price was included in the filing. However, Bloomberg data showed Asia Bioenergy was traded in the range of nine sen and 10.5 sen on the said date.

With the purchase, Pelaburan Mara now holds 58.32 million or 6.94% Asia Bioenergy shares.

Pelaburan Mara has recently attracted attention, with its investments into penny stocks such as PDZ Holdings Bhd and Sanichi Technology Bhd.

Asia Bioenergy closed 0.5 sen higher at 17.5 sen, with a market capitalisation of RM147 million.

GPA gains 4.17% on optimistic outlook (Edge)

Shares of GPA Holdings Bhd advanced on Friday morning after an official of the company expressed hope for the return to return to profitability.

At 9.16am, the stock added 4.17% or half a sen to 12.5 sen with 3,200 shares done.

GPA Holdings, an automotive batteries manufacturer which is 23.26% owned by Tan Sri Robert Tan Hua Choon, hopes to return to the black in its financial year ending March 31, 2015 (FY15), after making losses in the past three financial years.

Eddie Tan Han Chuan, chairman of GPA, yesterday said the group will be focusing on non-automotive segment which provides better margins, and also on strengthening its foothold in foreign markets.

Lim Thean Shiang offers to buy Daya shares (Edge)

Daya Materials Bhd said it has received an offer letter from Datuk Lim Thean Shiang to subscribe to 100 million placement shares at 26.5 sen each, amounting to a total of RM26.5 million.

In a filing with Bursa Malaysia yesterday, Daya Materials said the issue price represents a discount of 2.78 sen or 9.49% to the five-day volume weighted average market price up to and including Sept 24 of 29.28 sen, being the last trading day prior to the offer date. Lim is an independent non-executive director of MSM Malaysia Holdings Bhd and formerly the executive chairman of PKFZ Sdn Bhd.

On Aug 22, Daya Materials announced a series of fundraising exercises, which included a proposed private placement of up to 25% of the company’s issued and paid-up share capital (of RM138.88 million, comprising 1.389 billion shares of 10 sen par each), entailing 347.2 million placement shares.  The exercise was to part finance its acquisition of two offshore subsea construction vessels  for a total of U$285.5 million (RM927.87 million).  The placee(s) for the balance of up to 247.2 million placement shares shall be identified at a later stage.

The counter closed down 0.5 sen or 1.69% to 29 sen yesterday, giving it a market capitalisation of RM402.76 million.

This article first appeared in The Edge Financial Daily, on September 26, 2014.