Axiata on the Buy Again?

Reuters reported that Axiata has expressed interest to buy the Sri Lankan and Cambodian assets of Luxembourg-based telecom operator Millicom worth at least US$500 million (RM1.75 billion).

Axiata, Malaysia's second-biggest mobile phone operator, is among a number of bidders that have expressed interest to buy the Asian assets of Millicom

According to sources, JPMorgan is advising Axiata on the Sri Lankan assets and Bank of America-Merrill Lynch on the Cambodian assets. Both the assets could be worth at least US$500 million, the sources said.

Axiata has declined comment on this. A spokeswoman for Axiata said the company would make an announcement if "any corporate action is made."

Millicom said last week it had appointed Goldman Sachs to advise it on a strategic review of its Asian business and several potential investors were eyeing the assets.

We will put our ears keenly on this ground for further development.

English-Quo Vadis?

The Cabinet will decide today on the direction of English usage in the teaching of Science and Mathematics.

A poll by the Merdeka Centre, an independent polling house, suggests for a continuance of English as the medium of instruction for Science and Mathematics.

The poll also showed that even more Malaysians backed the recent proposal by Deputy Prime Minister Tan Sri Muhyiddin Yassin to make a pass in English compulsory in the SPM examination.

Despite the very vocal protest by some educationists and politicians, the poll by the Merdeka Center suggests many ordinary Malaysians did not agree with their nationalistic views and concerns that rural and Malay students would not be able to cope.

A whopping 69 per cent of Malaysians polled believed that a pass in English should be made compulsory.

Only 26 per cent of those polled disagreed, while five per cent were undecided.

Asked about the teaching of science and mathematics in English, 58 per cent of Malaysians polled wanted the policy to be maintained.

Only 32 per cent of those polled wanted the English policy to be reversed, while nine per cent were undecided.

The polling house also asked Malaysians their opinions on the move the limit the number of subjects in the SPM examinations to just ten, 58 per cent of Malaysians backed the proposal.

A total of 32 per cent of those polled did not agree on limiting subjects, while nine per cent were undecided.


Many people back Muhyiddin’s recent proposal to make a pass in English compulsory in the SPM examination.

According to the methodology of the survey, 44 per cent of the respondents were classified in the rural demographic while 56 per cent were from urban areas.

We will all know by the evening where English is going to heading-to be continued in its current usage;to be made a compulsory subject to pass SPM or to be dumped into the Alam Flora garbage truck.

The Wall is Weeping

In an apparent reaction to talks that a second government stimulus plan is in the offing as earlier pump-priming did not meet expectations,Wall Street tanked to its lowest level in 10 weeks after rising 40% since March. Rumours of weak corporate earning reports due soon also helped in magnifying the dive.

"It's clear that over the last three plus weeks that investors are becoming concerned that the recovery in the economy will not come as soon as expected and will not be as strong as expected," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York.

"When there's talk about another stimulus plan that adds fuel to that fire, it intensifies the concerns about the timing and strength of the recovery."

Cyclical stocks in the materials, energy, and industrial sectors, which had ridden a recent upswing in raw material prices on recovery hopes, led the market down as commodity prices eased. Copper, a barometer of global economic strength, fell nearly 2 percent.

An initial snapshot of the second-quarter performance of natural resource companies will come today when Alcoa Inc kicks off quarterly earnings season. The aluminium producer, a Dow component, is expected to post a third consecutive quarterly loss.

S&P 500 corporate earnings are expected by analysts to have declined about 36 per cent from a year ago, according to data compiled by Thomson Reuters. That would be roughly the same as the decline seen in the first quarter.

Doubts about the strength of an economic recovery and subsequent demand for oil have sent crude prices tumbling in the last week. New York crude CLc1 fell 1.8 per cent yesterday and is down about 14 per cent from the intraday peak hit on June 30. Its slide has pressured energy stocks.

Non-cyclical areas of the market, which have been stronger in recent weeks as investors sought out companies better positioned to weather a weak economy, initially withstood the sell-off on Tuesday. But by the end of the day even the defensive sectors fell victim to selling.

Health care, a classic defensive sector, traded in positive territory for most of the day but by the close the S&P healthcare index fell 0.3 per cent — still outperforming the wider market.

Drug maker Pfizer Inc, one of the few Dow stocks to finish in positive territory, edged up 0.1 per cent to US$14.59.

The world awaits the dawn of the second stimulus package.

Can Obama deliver?

A Light Rap on the Wrist

Mas today meted out a token rap on the wrist of 10 financial institutions that made a boo-boo on selling complicated structured instruments to its customers. The fall-out came after Lehman Brothers investment bank collapsed last year.They have been banned from selling similar products by the Monetary Authority of Singapore. (MAS).

About 9,900 people lost most or all of their investments totalling about S$520 million (RM1.82 billion) in structured notes such as Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes.

Hong Leong Finance got the harshest penalty-it cannot deal with such instruments for at least two years. Some 2,145 disgruntled customers were caught with S$86.1 million worth of such structured notes

One-year bans were handed out to brokerages CIMB-GK Securities, Kim Eng Securities, OCBC Securities and Phillip Securities.

OCBC Securities was also ordered to stop using introducers such as independent financial advisers to provide advice on new structured notes.

A six-month ban was given to DBS Bank, ABN Amro, Maybank, DMG & Partners Securities and UOB Kay Hian.

The bans took effect on July 1 and punish the institutions for their poor sales processes when flogging the complicated notes to customers.

They will not be allowed to resume selling such products until the MAS is satisfied that they have fixed all faults identified by its review and strengthened their internal processes for providing advisory services for investment products.

Each must appoint an external party, approved by the MAS, to review its action plan and report on its implementation.

The MAS investigated after affected customers complained that they had lost their savings because they had been mis-sold the Lehman-linked products.

They described being sold products that were too risky for their comfort level or were advised by sales representatives who did not know the products well.

The MAS found that the 10 financial institutions applied different internal controls and failed in a number of areas.

Among other things, they gave the products a lower risk rating than that stated in the formal prospectus and pricing statements.

They also did not do enough to ensure that their sales staff were properly trained and had accurate and complete information needed to sell the products.

Although about 62 per cent of customers whose cases have been decided on were offered some compensation, the low payouts have led many to reject the settlements and consider taking legal action.

Even though the MAS has highlighted the institutions' failings and penalised them, this does not automatically mean that they will be liable to investors.

Some market watchers felt that the MAS penalty had only a minimal effect since the sales of structured notes have dried up, but others pointed to the intangible impact of damage to reputations.

“The unprecedented move by the MAS is in itself quite a painful penalty for these institutions to be subjected to, and they certainly would not like to be on that list,” said Robson Lee, a partner at the law firm Shook Lin & Bok.

The Consumers Association of Singapore (Case) expressed disappointment at the lack of due diligence and internal controls at the institutions.

“Case feels that individuals who were found to have breached the Financial Advisers Act should be investigated and taken to task,” said Case.

The MAS confirmed that investigations against individuals are still under way and action may be taken in due course.

The chief executive of the Securities Investors Association of Singapore (Sias), David Gerald, said he was pleased that the MAS had asked institutions to rectify all the weaknesses identified and to review and strengthen all procedures.

We may yet see some individuals being hauled up and prosecuted, hopefuly, in the following months

1Malaysia-Ambiguous Escapism?

PM Najib stressed again his concept of 1Malaysia today.

To him, “1 Malaysia is not rigid;not cast in stone but a national discussion. We will incorporate other views and opinions,” he said, adding: “It is a strategic ambiguity.”

My analysis:

Like a changing organism, this concept appears to be a work-in-progress-a thing that evolves to add positive elements from time to time. Formless like an amoeba,the concept will constantly be shaped by the exigencies of circumstances. It is at best, soft ideals with built-in escape clauses.

As such, 1Malaysia is an easy and loose concept-meant to be malleable and be shaped to suit all political expediencies. The crux of it all-it must be founded not only on genuine core principles but these principles must be fleshed out transparently in programmes, projects and social action that is fair to all.

If the government is sincere, 1Malaysia will indeed be the ethos of the Malaysian psyche.Meant to over-ride all considerations of race and creed, this concept if successfully implemented will surely be accepted by all and sundry. The question remains, has the government a will of steel to pull it through?

Najib's take on this concept utilises colourful language.


"Under the concept of 1Malaysia, all Malaysians regardless of race, religion and background should be able to call Malaysia their home. 1 Malaysia represents one dream, one people, one Malaysia. Every Malaysian must be given the rightful place under the Malaysian sun."

And so he added that 1 Malaysia would now see the introduction of policies that provide for both social justice and equality.

For example; the government will provide aid and scholarship according to the social economic background of all races, he said.

“We will introduce policies which are equal for all and eradicate poverty regardless of race. If they ask for help, and they want to be helped, the government will be [there to do its bit]."

Najib also brought to the fore, the issue of tolerance. He advised Malaysians to desist from an attitude of tolerance and to begin accepting each other as fellow Malaysians because only through acceptance can the nation prosper and become developed.

“We must begin to accept and not only tolerate because tolerance is a concept of not wholeheartedly accepting or grudgingly accepting. Acceptance is a better concept and we must begin to accept that we are a plural and multi-racial country,” he said.

Najib added Malaysians must take advantage of the country’s multiracial society in fostering relationships with economic powers in the region and making Malaysia the gateway to Asia.

He said that the country can have an economic advantage with China and India with the Chinese and Indian communities in Malaysia and also encourage investments from the Middle East because Malaysia is a Muslim nation.

My concern:

Can merit be used in all matters of national consideration? As long as the affirmative policy is locked in place,can we really trust 1Malaysia to bear national fruits?

Have a Close Look at Zelan below 76 sen

Zelan, formerly Tronoh Mines, continues to be uncertain of its dividend policy. The project book value,skewed towards the Middle-east, may also be affected by the on-going global recession.

AMResearch did a piece on Zelan and did not expect it to pay a final dividend in its fourth quarter of financial year 2009 (4QFY09) as the company remained non-committal on its dividend policies going forward as well as the massive losses racked up by its construction division in 3QFY09 and a dwindling cash pile.

“As such, we are leaving Zelan’s FY09F DPS (dividend per share) forecast unchanged at five sen/share. But, we have cut our FY10 to FY11 DPS assumptions to one sen each from two sen previously on a dividend payout ratio of 7%-11%,” the research said in its recent note after a visit to the company.

Over the past three years, Zelan’s DPS ranged between 7.5 sen and 14 sen, which translated into a payout ratio of 46% to 48%. For the first nine months of FY09 ending March, the group has paid an interim DPS of five sen.

The company’s balance sheet remained strong with a net cash position of RM53 million as at Dec 31 last year on the back of its 9% stake in IJM Corp Bhd valued at RM377 million (RM0.67/share) or 86% of the group’s market capitalisation of RM436 million.


Nevertheless, AmResearch said its immediate concern remained with the company’s murky order book outlook and further execution risk for its Middle Eastern contracts.

“Zelan’s management revealed that the group is not aggressively bidding for new contracts at this juncture — instead its main focus is on delivering outstanding jobs worth an estimated RM2.4 billion.

“More so, as the current roll-out of power plant projects — Zelan’s niche — has been put on hold due to the deepening global recession. We have assumed RM500 million worth of new contracts each for FY10 and FY11, compared to the record RM2.5 billion achieved in the 14 months ended March last year,” the research house added.

Zelan’s exposure to Middle Eastern contracts are 86% of its outstanding order book.

“We have lowered our FY10 to FY11 construction margin forecast to 3% to 6% (previously: 8% to 9%) compared to the average of 18% achieved for mainly higher-margin engineering, procurement and commissioning (EPC) jobs undertaken over the last five years,” the research house added.

The company’s foreign shareholding has fallen below 10% from its peak of 33% to 34% in 2008.

Hence, AmResearch maintained its hold call at 76 sen with a lower target price of 85 sen, after pegging the stock at an unchanged 40% discount to its revised sum-of-parts value of RM1.41 per share to account for its earnings downgrade as well as a rollover of valuation base to FY10.

Zelan is now trading at about 81 sen as of today (7 July)

As IJM continues to hog the lime-light with its super profits, could its good fortune also spillover to Zelan?

God's Wonderful Creations!

Here are some startlingly good photos from last year's National Geographic.

Savour the magic of nature!