Sumatec shares, warrants down, active trade after profit warning (Edge)

Shares and warrants of Sumatec Resources Bhd continued to be actively traded today, emerging as the top and sixth most heavily-traded stocks respectively in morning trades, after the Practice Note 17 (PN17) oil and gas (O&G) company made known that it may not meet its FY14 net profit forecast...

Yesterday, Sumatec cautioned investors that it may fall short of the forecast net profit of RM69 million for its financial year ending Dec 31, 2014 (FY14).
“In view of the technical requirements to install artificial lift pumps on a number of wells, the company as a result has seen a delay in bringing some of the wells onto production,” the group had told Bursa Malaysia.

It added that to address the situation, its management will deploy all available resources to expedite completion of the remaining works under the workover programme.

It will also install the artificial pumps and conduct production enhancement on each well, as well as add more wells into the workover programme.

Sumatec returned to profit in the second financial quarter ended June 30, 2014 (2QFY14), posting a net profit of RM6.7 million compared with a net loss of RM3.94 million a year ago. The group generated revenue of RM13.75 million from its upstream O&G activities.

The better 2QFY14 results helped the group swing to a profit during the six months period of RM11.17 million, from a net loss of RM9.16 million a year earlier. Its revenue stood at RM27.49 million.

CIMB Research maintains Add on Cuscapi, cuts target price to 45 sen (EDge)

CIMB Research has maintained its Add rating on Cuscapi Bhd at 37 sen with a lower target price of 45 sen (from 70 sen) and said Cuscapi recorded a RM2.9 million loss in 1H14, which was below house expectations as the research house believed that the company had turned around early this year.

In a note Aug 28, the research house said Cuscapi’s operations seem burdened by higher operating costs while its topline growth was slow.

“We slash our EPS forecasts and this causes our target price to drop as we maintain our target valuation basis at 21x CY15 P/E, in line with its peers.

“The stock remains an Add, with higher REV subscription numbers and the clinching of more major contracts being the potential re-rating catalysts,” it said.

KEuro aims to exit Talam Transform within a year (Edge)

Kumpulan Europlus Bhd (KEuro) plans to exit as shareholder of Talam Transform Bhd over the next 12 months, said the group’s independent non-executive director Datuk Oh Chong Peng.

“We have a plan to exit Talam since it does not fit into our plans,” he told reporters after KEuro’s annual general meeting yesterday.

In July, KEuro disposed of 230 million shares or a 5.45% stake in Talam Transform to Jejak Progresif Sdn Bhd, an investment vehicle belonging to Tan Sri Chan Ah Chye, for 9.4 sen apiece. Last Thursday, KEuro said it had entered into a memorandum of understanding with Chan to sell 840 million shares to him at 11 sen per share. ...

Salcon was pushed into the red (Edge)

Salcon Bhd was pushed into the red in its second quarter ended June 30, 2014 (2QFY14), with a loss of RM4.73 million against a net profit of RM1.32 million a year ago.

This was despite a 122.1% year-on-year increase in its revenue to RM33.27 million, from RM14.98 million.

Nevertheless, for the first half of the financial year 2014 (1HFY14), Salcon's net profit rose more than twofold to RM11.66 million, from RM3.74 million recorded in 1HFY13.

Revenue climbed to RM73.7 million — a 43.97% increased from RM51.19 million for the same period last year.

KNM posted a 50.4% jump in net profits (Edge)

KNM Group Bhd

posted a 50.4% jump in net profits for its second quarter ended June 30, 2014 (2QFY14) to RM11.12 million, from RM7.39 million a year ago, mainly due to better project contribution margin.
The oil and gas group told Bursa Malaysia that its revenue rose 12.7% to RM489.31 million in 2QFY14, from RM434.09 million a year ago.

For its six months ended June 30, 2014 (1HFY14), KNM reported a two-fold increase in net profits to RM25.29 million, as compared to RM9.61 million a year ago.

Jag expects to see 10% growth next year (Star)

Electronic waste-recycling company Jag Bhd expects to match its financial performance achieved in financial year ended Dec 31, 2013 and eyes a further 10% growth in topline in the following FY15.

“We see a better financial situation next year. While for this year, we should be able to achieve what we achieved last year and I am fairly confident of this,” executive director Datin Stacey Tan told StarBiz.

“We are in the midst of securing new suppliers now – and this is all the hard work we put in now (this year). This is the first year where Jaring Metal Industries Sdn Bhd (JMI) is being listed and it is the first time where people in the industry would have heard about us,” Tan added.

JMI, which was privately held before, in the beginning of this year completed a reverse takeover (RTO) process of Jag, which was formerly known as Infortech Alliance Bhd that is listed on the Ace Market of Bursa Malaysia.

The enlarged group today saw almost its entire revenue contribution from the wholly owned JMI, said Tan, adding that the company still intended to retain the information technology side of the business as it still had a strong client base there.

In its FY13, Jag recorded a 8.14% growth in its topline to RM135.7mil while net profits dipped slightly to RM7.88mil from RM8.5mil in FY12 due to an increase in costs and a loss from commodity hedging.

Jag, which is based in Shah Alam, is confident of increasing returns as the waste-recycling industry in the country is regulated by the Government.

The company noted that there were presently 18 companies that had been granted licences in the full recovery category of waste recycling in Malaysia and there are four of such companies in Selangor.

Jag also has major multinational companies in the semiconductor manufacturing industry as its clients or suppliers, which are renewable on a contract basis for up to three years.

The company’s facility today processes mainly 80% of e-waste that would eventually be converted into copper. ..

“As it is, we are the only listed company doing e-waste recycling and we hope to eventually branch out and this can be seen with our efforts by signing a memorandum of understanding (MoU) with SWT International Sdn Bhd to process medical waste,” Tan said.

The MoU for a joint venture, which is due next month, would be extended for a further six months pending further finalisation of other finer details and the like, added Tan.

“This will give us room to ensure that we are very clear before we go straight into the joint venture. Although I see very high chances but we do need to be very clear first before we pump a whole lot of money into it (the venture),” said Tan.

The company had seen keen interest from several bankers and funds of late and there was some kind of excitement and curiousity invoked when the recycling industry is mentioned.

Other recyclers which are publicly listed today are Ace Market Hiap Huat Holdings Bhd and Tex Cycle Technology (M) Bhd; and the SGX Listed Metech International Ltd.

Meanwhile, with the help of an reinvesment allowance grant from the Government, Jag recently bought a new machine that is imported from Australia which allows copper and nickel to be exctracted directly from solid and liquid waste.
“This machine will increase efficiency and productivity as we do not need to use the furnace that has to be fuelled up every now and then. We use chemicals instead to extract these metals,” said Ng, who took StarBiz on a tour of the facility recently.

The new machine, which would go into operations by the end of the year, would enable it to increase its total processing capacity by 10% to 1,100 tonnes per month.

Jag had in April also completed the acquisition of neighbouring piece of 1.06 ha freehold land that was mostly capitalised into its balance sheet.

Alliance DBS Research downgrades TH Heavy Engineering (Star)

Alliance DBS Research has downgraded TH Heavy Engineering after the 2Q14 financial results were below it and consensus estimates as it reported a net loss.

“Challenging near term outlook with immediate need to replenish orderbook and rising cost pressures. Longer term outlook more positive with US$372mil floating production, storage and offloading (FPSO) contract in hand,” it said on Monday.

Alliance DBS Research downgraded the TH Heavy to Hold and reduce the target price to 95 sen.

TH Heavy reported a net loss of RM6.2mil in 2Q14 and a cumulative loss of RM4.5mil for 1H14...

The research house said TH’s latest orderbook of RM250mil does not provide earnings visibility beyond FY14. ..

Alliance DBS Research also said the FPSO provides steadier long term outlook. The US$372m FPSO contract with Nippon Oil provides TH with much needed longer term earnings visibility.

The project is still in the engineering phase with topside construction activity to start in 4Q14.

“We expect the charter contract to commence in mid-FY16 onwards from our earlier assumption of early-FY16.

“We cut our FY14-FY16 estimates by 38-59% to reflect higher costs of fabrication activities, slower orderbook replenishment pace, and also a later start on the FPSO,” it said.

Daya Materials to buy 2 vessels for US$280m (Edge)

Integrated oil and gas company Daya Materials Bhd, which plans to buy two offshore subsea construction vessels for US$280 million (RM888.2 million) in cash, will undertake three major fund raising exercises to part-finance the acquisitions.

In a filing with Bursa Malaysia today, Daya Materials said it will place out up to 25% stake and rights issue, with free warrants to raise RM230 million.

It will also issue a seven-year redeemable convertible secured bonds of up to RM120 million.

Shares of Daya Materials have been suspended with effect from 2.30pm today, pending the announcement of the acquisitions.

Daya Materials said it had signed two memoranda of agreement with Siem Offshore Rederi AS (SORA) today, to acquire the offshore subsea construction vessels.

The two dynamic positioning class 2 (DP2) vessels, dubbed Siem Daya 1 and Siem Daya 2, will cost Daya Materials US$140 million (RM444.1 million) each.

Besides, Daya Materials will also pay an additional US$2.3 million (RM7.3 million) for a 50 metric-tonne active heave compensation 3,000 metres crane.

SORA is a Norwegian company wholly-owned by Siem Offshore Inc — a marine services provider for the offshore energy service industry.

Daya Materials said the proposed acquisitions will enable the group to own and operate the vessels, instead of chartering them from SORA.

It will also further enhance the operating cost structure of the vessels, which is expected to contribute positively to the future profitability of the group.

The acquisitions are also in line with the group’s business strategy to own operating assets to expand its range of subsea services and enhance its subsea capabilities in offshore oil and gas operations, it added.

On the proposed fund raising exercise, the group said it is expected to be completed by the first quarter of 2015, whilst the proceeds to be raised are expected to be utilised within six months from the completion.

Daya Materials also highlighted that it intends to fork out US$285.5 million cash, for the acquisitions. Of that, US$117.8 million will be from the fund raising exercise, while the remaining US$167.7 million will be from financial institution’s borrowings.

The group said its earnings per share (EPS) may be diluted, as a result of the increased number of shares after the issuance of placement shares and the rights issue shares.

The acquisitions are expected to be completed in the first quarter of 2015.

PDZ says several parties keen to buy stake from major shareholder (Star)

PDZ Holdings Bhd said its major shareholder, understood to be Pelaburan Mara Bhd (PMB), has been approached by several parties keen on buying the latter’s stake in the company.

A filing by PDZ with Bursa Malaysia was in response to a news report about an associate of tycoon Tan Sri Halim Saad being interested in buying a more than 10% stake in PDZ from PMB. The report named James Chan of Kenmakmur Holdings Sdn Bhd as the likeliest associate.

PDZ has been in the news lately for the active movement of its shares, which have risen from 17 sen at the start of this month to hit a seven-year high of 37.5 sen on Tuesday...

In April, PMB paid RM41mil for a 27% stake in PDZ from major shareholder Tan Sri Robert Tan. ..

Last week, PMB sold five million shares at 22.5 sen each in an off-market deal. The sale would have netted PMB a gain of RM175,000, based on its entry cost of 18 sen per PDZ share.

Ah Chye to acquire 19.9% of Talam from KEuro for RM92.4m (Edge)

Tan Sri Chan Ah Chye has entered into a memorandum of understanding (MoU) with Kumpulan Europlus Bhd (Keuro) to purchase 840 million shares or a 19.9% stake in Talam Transformation Bhd at 11 sen per share, which works out to RM92.4 million. (0.11 per share)

“The MoU would be valid for four weeks from the date of the MOU or the execution of a sale and purchase agreement of the sale shares,” the announcement by Talam said today.

Chan, who is a director at Talam, currently owns 8.68% of the property development outfit.

Handal 2Q profit falls 12% on year, revenue higher at RM26m (Edge)

Crane manufacturer Handal Resources Bhd's net profit fell 12% to RM698,000 in the second quarter ended June 30, 2014 from RM789,000 a year earlier. Revenue, however, rose to RM25.66 million from RM21.54 million.

In a statement to the exchange today, Handal said first half net profit climbed to RM1.25 million from RM224,000 a year earlier. Revenue was higher at RM49.64 million versus RM41.28 million.

CMOG to assume Ideal Jacobs listing, eyes oil & gas, power biz (Edge)

Ideal Jacobs Corp Bhd has signed a master restructuring agreement with CMOG Group Sdn Bhd to facilitate the reverse takeover (RTO) of the former.

In a statement today, labeling specialist Ideal Jacobs said under the agreement, the entire issued share capital of the company would be exchanged for new shares in CMOG.

CMOG is the special purpose vehicle to undertake the RTO and assume the listing status of Ideal Jacobs. CMOG will, subsequently, focus on oil and gas (O&G) operations.

The master restructuring agreement involves the exchange of the entire issued and paid-up capital of Ideal Jacobs comprising up to 138 million shares for a similar number of new CMOG shares, and 69 million free warrants in the latter.

"Upon completion of the proposed RTO, all existing shareholders of Ideal Jacobs will be shareholders of CMOG and the listing status of Ideal Jacobs will be transferred to CMOG, which will enable CMOG to be admitted to the ACE Market of Bursa Malaysia Securities Bhd.

"To allow the new structure under CMOG to focus solely on the O&G businesses, CMOG and Ideal Jacobs Holdings Sdn Bhd have entered into an agreement for a management buy-out of the entire equity interest of Ideal Jacobs for a cash consideration of RM19.5 million," Ideal Jacobs said...

In conjunction with the RTO, CMOG has entered into conditional share acquisition agreements with the vendors of Cekap Technical Services Sdn Bhd and MECIP Global Engineers Sdn Bhd to acquire the stakes in both O&G firms for RM129 million.

The all-share deal will see CMOG issuing 516 million new CMOG shares at 25 sen each to the vendors...

"In conjunction with the proposed RTO, CMOG will undertake a fund-raising exercise via issuance of new shares to identified investors. The company has proposed to undertake an issuance of up to 32 million new CMOG shares to identified investors at an issue price of RM0.25 per CMOG share.

"To meet the public shareholding spread requirement for CMOG, the vendors of Cekap Technical Services and MECIP will undertake an offer for sale of their shares on a pro-rata basis of up to 114 million CMOG shares at an offer price of RM0.25 per share to identified investors," Ideal Jacobs said.
The existing management of Ideal Jacobs under Jacobs and Meng believes the corporate exercise made commercial sense.

Jacobs said shareholders stood to benefit from the revamp, which would turn the company into an O&G entity...

“CMOG Group will greatly increase our value in terms of services and delivery capabilities, so much so that it is a quantum leap beyond our current business-as-usual,” he said.

Yahya also said the company could venture into the power business. “At the moment our focus is on Ideal Jacobs and the process we’re going to go through with them,” said Yahya.

Trading of Ideal Jacobs shares has been suspended since last Thursday (August 14) in conjunction with the announcement on the corporate exercise.

The stock closed at 72 sen last Wednesday.

CIMB Research maintains Add on TH Heavy, raises target price to RM1.23 (Edge)

CIMB Researh has maintained its Add rating on TH Heavy  Engineering Bhd (THHE) at 90 sen with a higher target price of RM1.23 (from RM1.20) and said fabrication order book replenishment and the new FPSO venture were the main talking points at its recent roadshow with management of THHE.

In a note Aug 15, CIMB Research analyst Norziana Md Inon said the positive surprise from the roadshow was that the company may add a second FPSO vessel in as early as 1H15.

Norziana said her target price rises as she raised her FY15-16 EPS for THHE to impute contribution from the fabrication of FPSO modules, which more than offsets the dilutive impact from the warrants.

“We continue to value the stock at a CY15 P/E of 16.4x, a 30% discount to the average P/E of the oil & gas big caps.

“A growing order book and successful FPSO and T&I ventures are the potential re-rating catalysts.

“THHE remains an Add and our top pick among the oil & gas small caps,” she said.

PDZ denies report on asset-buy, corporate exercise talks (Edge)

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

In a statement to Bursa Malaysia, PDZ said the potential assets were part of the company's business plan formulated in general terms. PDZ said the plan might involve fund raising exercises, including a rights issue.

The firm said any due diligence on potential assets was only part of the normal business process and governance undertaken by the company...

Nevertheless, PDZ said it was keen to explore potential acquisitions or exercises that would enhance shareholder value. PDZ said Asia Pacific was a key market for the company.

“As a growth-oriented company and in line with our transformation plan, PDZ is keen to explore any potential acquisitions or exercise,” it said.

EG Industries secures orders worth RM300mil (Star)

EG Industries Bhd has already secured about RM300mil worth of orders for its printed circuit board assembly (PCBA) device used in hard-disk drive (HDD) and box-built consumer electronic products.

Group chief executive officer Alex Kang said that EG Industries secured the orders for its first quarter ending Sept 30, 2014.

He said the hard-disk drive PCBA devices were sold to major producers such as Western Digital, while the PCBA used in consumer electronic products went to Dyson, Oxylane, and OJ Electronics, which were branded consumer electronic products makers based in Europe.

“These products are expected to be delivered by the end of fiscal year 2015’s first quarter,” he said.

Kang said that customers in the United States and Europe were shifting their focus of OEM (original equipment manufacturer) and ODM (original design manufacturers) from China, making South-East Asia their preferred destination.

“Our box-built business serving the consumer electronic product segment, for example, has attracted new European customers.

“Some projects had been successfully launched in recent months, while some projects are still ongoing.

“With the number of clients continuing to expand globally, diversification into new industries and synergy prospects created from strategic investment by Jubilee, a Singaporean plastic injection moulding facility, the future of the company is optimistic,” he said. ..

According to Kang, the SMT plant is about 90% utilised, and is in need of expansion.

“We are now looking to acquire a suitable site to expand the SMT activities. Kulim and Batu Kawan are the possible sites we are exploring.

“We plan to implement either a rights issue or new bonds to raise about RM50mil in the 2015 fiscal year for the expansion ,” he said.

For the 2014 fiscal year ended June 30, the group expects to achieve close to RM1bil in sales revenue.

“We are confident of achieving the target because the revenue for the third quarter is already at the RM760mil mark, with a net profit of RM3.3mil,” Kang said.

KNM expected to secure RM1b worth of jobs from Rapid (Edge)

KNM Group Bhd
(Aug 8, RM1.07)
Maintain buy with target price of RM1.50: The refinery and petrochemical integrated development (Rapid) project’s mega packages are finally out. Sinopec Engineering Group Co Ltd has secured a letter of award from Petroliam Nasional Bhd (Petronas) for an engineering, procurement, construction and commissioning (EPCC) contract valued at about US$1.33 billion RM4.27 billion). KNM is one of Sinopec’s selected subcontractors for this package, having been involved in the bidding process with Sinopec.

We believe that KNM’s effective portion of the contract is US$280 million. Works are likely to start in early 2015 and will be carried out over two years.

This is a positive development for KNM. Apart from this Rapid package, we understand that KNM would also have exposure to several other packages.

According to market sources, apart from Sinopec, the other EPCC winners for the other four Rapid-related packages are CITC, Technicas Reunidaf, Petrofac and Toyo.

In total, we expect KNM to secure about US$800 million-US$1 billion worth of jobs from Rapid alone over the next three years (2015 to 2017). We expect subsequent contract flows from Rapid over the next few months to be in favour of KNM.

As a result, we have raised our 2015 and 2016 earnings forecasts by 44% and 40% respectively, taking into account expectations for higher backlog orders (+50% to RM3 billion per annum).

Similar to our other cyclical, order-driven oil and gas stock coverage, we are now adopting the backlog-based valuation method for KNM.

Its orders momentum should drive price performance and this new approach best reflects KNM’s prospects. For this, we have raised our target price to RM1.50 (+50sen), based on 0.7 times enterprise value/backlog multiple for 2015.

The 0.7 times reflects its three-year historical threshold. We have assumed a RM3 billion order backlog for 2015. — Maybank IB Research, Aug 8

State fund offers to take Malaysia Airlines private (CNBC)

Malaysia Airlines (MAS) said Friday that state fund Khazanah has offered 27 sen a share, amounting to 1.4 billion ringgit ($435 million), to take the beleaguered airline private.

The offer is at a premium to the airline's closing price of 24 sen per share on Thursday. Shares were halted on Friday pending the announcement.

The carrier will request for a delisting due to "deteriorating financial performance" and Khazanah, which owns 69 percent of MAS, will undertake a comprehensive review and restructuring of the airline, MAS said...

Scanwolf major shareholders pared stakes via off-market (Edge)

Two of Scanwolf Corp Bhd's major shareholders, Datuk Loo Bin Keong and Datuk Tan Sin Keat, have pared their stakes in the loss-making furniture parts manufacturer via off-market transactions today.

Some 20 million shares or 26.56% in Scanwolf were crossed for 50 sen a share or a total of RM10 million.

According to Scanwolf's filings with Bursa Malaysia, Loo, who is Scanwolf's chief executive officer and single-largest shareholder, sold a block of 16 million shares, leaving him with 7.9 million shares or a 10.43% direct stake and 0.04% indirect portion.

Meanwhile, Tan, an executive director of Scanwolf, ceased to be a substantial shareholder of the company after selling four million shares, leaving him with 3.07 million shares or 4.08%.

Four shortlisted for water pipe contract in PIC (Edge)

Four parties have been shortlisted by Petroliam Nasional Bhd (Petronas) for the supply of water pipes to its Pengerang Integrated Complex (PIC) in Pengerang, southern Johor, according to sources.

It is learnt that the four candidates are Puncak Niaga Holdings Bhd, Ho Hup Construction Co Bhd, a joint venture between Salcon Bhd and George Kent (M) Bhd (GKent) and Loh & Loh Corp Bhd, which was taken private some years ago.

Sources revealed that the supply contract is estimated to be worth about RM300 million.

“The winner of the contract should be announced soon,” said one source.

An executive familiar with the matter, however, noted that the bid could be for engineering, procurement, construction and commissioning (EPCC) services for a water treatment plant.

“The bid is for EPCC kind of work for a water treatment plant,” he said.

The RM89 billion PIC project in southeast Johor is expected to spin off a slew of construction and engineering contracts to local as well as foreign companies.

Apart from the petrochemical complexes, the massive project also involves the building of a power plant, a reclassification terminal and pipes to channel huge amounts of water and fuel to site.

Among the contracts that have been awarded are the earthworks job to Gadang Bhd and an RM341.88 million contract for construction of roads to WCT Holdings Bhd.
The entire project covers 20,600 acres (8,336ha), which is almost twice the size of Putrajaya.

The construction of the entire project is estimated to require 150 billion tonnes of structural steel and one million cu m of concrete.

The PIC, the core of the refinery and petrochemical integrated development project, is reported to be able to produce up to 7.7 million tonnes per annum of various grades of petrochemical products, which currently surpasses the company’s combined production capacity of complexes in Kertih, Terengganu, and Gebeng in Pahang.

According to Petronas group chief executive officer and president Tan Sri Shamsul Azhar Abbas, construction and engineering works on the site are expected to begin between next year and 2016 and the project has to be ready by early 2019 to be able to catch up with the cycle of the petrochemical industry.

In terms of share price performance, GKent is the best performer. The stock has leapt 87.8% year-to-date to close at RM2.16 yesterday. The company had recently revealed its intention venture into the oil and gas sector.

Salcon, which has sold off its water treatment business in China, has gained 37% so far this year to 90.5 sen yesterday. Ho Hup is up 10% this year to RM1.33, while Puncak Niaga has risen 4.6% to RM3.40.

This article first appeared in The Edge Financial Daily, on August 5, 2014.

Bina Puri to build Universiti Malaysia Sabah hostel for RM115m (Edge)

Bina Puri Holdings Bhd has secured a contract to build a hostel for Universiti Malaysia Sabah for RM115.42 million.

In an announcement to Bursa Malaysia today, Bina Puri said its unit, Bina Puri Sdn Bhd had accepted the letter of award from Arkitek TM on behalf of its employer, Likas Bay Precinct Sdn Bhd.

Bina Puri said the project within Kuala Menggatal, is expected to be completed in 28 months.

“With this latest award, the group’s unbuilt book order stands at RM2.18 billion as at to date. The management is confident to secure more projects for the year 2014,”  Bina Puri said.