CIMB-Best Quarterly Results Thus Far

CIMB has forecast that 2H results of 2010 will be as good as the first half.

CIMB -the country's second largest banking group,posted a record quarterly net profit in the April-June period and is positive on its prospects for the rest of the year.

Net profit in the second quarter was RM889 million, up 34 per cent from a year ago and 6.1 per cent higher than the first quarter's.

Its first half net profit rose 35 per cent to RM1.7 billion, driven by a strong rebound in corporate and investment banking, stronger contribution from its Indonesian unit and a drop in loan loss provision.

"This is our highest-ever three-month and six-month performance. We are positive on the outlook for the second half as there is a strong capital market deal pipeline and consumer growth momentum," group chief executive Nazir Razak told reporters at a results briefing late yesterday.

Analysts expect it to turn in a net profit of RM3.5 billion for the full year.

The group raised its return on equity target for the full year to 16.5 per cent from 16 per cent before. It kept the loan growth target at 12 per cent. Loans increased 11 per cent last year.

The group called off plans to sell a majority stake in its Southeast Asia Special Asset Management Bhd unit, in which it had lumped about RM8.4 billion worth of legacy bad loans.

It would not be "economically sensible" to divest the stake now under the new Basel II risk-based capital adequacy framework, Nazir said.

"With Basel II, that business is actually a lot more valuable to us from a capital and economic standpoint than we thought before," he remarked.

Nazir said CIMB Group will remain conservative in its capital position as it is still in the midst of migrating to the new framework.

Its Indonesian unit, PT Bank CIMB Niaga, was the largest contributor to the group's earnings. It accounted for 36 per cent of the group's profit before tax of RM2.3 billion for the half-year, compared with 18 per cent a year earlier.

CIMB Thai, which returned to profitability in that period, accounted for 1 per cent of the group's pre-tax profit. The Malaysian consumer bank's contribution to group pre-tax profit was slightly lower at 14 per cent, compared with 15 per cent before.

Corporate and investment banking's profit before tax rose about 73 per cent to RM498 million as regional capital markets in the first half were significantly better than a year earlier.

Well, there are many new price forecast. Many say it may breach RM8.30 if market is amenable. 

Stingy Genting Hits the Profit Jackpot

Genting Bhd posted a whopping 244.6% jump in net profit for its second quarter ended June 30 to RM739.2mil compared with RM214.5mil in the same quarter a year ago.

Revenue stood at RM4.1bil compared with RM2.1bil previously.

Genting said in a statement that the increase came mainly from its leisure and hospitality division following the commencement of Resorts World Sentosa (RWS) in Singapore.

It said the improved revenue from RWS was largely due to better luck in the premium players business, which also contributed to improved profit.

Genting said its casino in Britain benefited from an increase in business volume but the weaker pound sterling translated into lower casino revenue in ringgit terms.

It said revenue and profit from Genting Plantations Bhd was higher in the quarter as a result of better palm product prices and improved fresh fruit bunches production.

However, its power energy division Genting Energy Ltd recorded a lower revenue due to lesser generation of electricity by its Meizhou Wan plant in China.

Genting’s oil and gas division also posted a drop in revenue and profit due to lower share of entitlement in China.

The company said, overall, its better performance in the quarter was due to share of results in jointly controlled entities and associates.

For the six months ended June 30, Genting posted a 124% increase in net profit to RM971.6mil compared with RM427.6mil in the corresponding period a year ago.

Revenue jumped 71.4% to RM7.2bil from RM4.2bil before.

The company said it was cautiously optimistic about its prospects as regional competition continues.

“While business has been resilient, the management will continue to closely monitor the competitive environment and intensify its plans to meet growing competition.”

Genting also said that with the opening of Marina Bay Sands, RWS’s business had showed resilience and its business model had displayed impressive strength.

“RWS continues to be optimistic with its business model for the rest of the year,” it said.

It added that the resort hosted a series of high-profile entertainment events and promotions and would continue to fill the rest of its year-long calendar with activities to encourage fresh and repeat visitations.

It said RWS would continue to improve its attractions, facilities and infrastructure to meet guest expectations. Construction of the West Zone has started and it is expected to commence operations next year.

Genting also said the performance of its power division was expected to be impacted by the Meizhou Wan plant, which was experiencing lower-than-expected tariff increases and reduced generation hours.

The performance of its plantation division remains satisfactory.

Genting has declared a gross interim dividend of 3.3 sen per ordinary share of 10 sen each, less 25% tax, for the first half of 2010. [As usual, no special dividends from this stingy stooge!]

This represents a 10% increase compared with 3 sen per ordinary share of 10 sen each, less 25% tax, in the first half of last year.

Metronic Global: Mangled by Bad Debts

As Metronic plays a sub-contractor role for some government projects,the inability of the main contractor to obtain the payments from these government departments has caused Metronic to have poor operating capital and thus cannot pursue many new projects which it otherwise could. This is reflected by its miserable price of 5-6 sen per share.

Just how much is owed to Metronic?

In a filing to the Bursa today, related party trade receivables is RM46.914 million for sub-contract work
on certain federal public sector projects for the Government of Malaysia.  RM10.594 million are from 1-3 years old debts while RM36.32 million are aged  from 3-5 years old.

In July 2010, the Company did receive a minuscule repayment of RM290,000 in respect of an outstanding related party trade receivables amount owing from the Main Contractor.

As to the step to be taken to recover the monies, Metronic proposes

(a)Actively meet and negotiate with related parties to pursue the outstanding receivables;

(b) Contra the receivables against payables with the same related parties;

(c) Obtained consent from the Main Contractor Related Party to proceed with the certification and collection directly from Ministry of Health (“MOH”), Ministry of Finance (“MOF”) and Jabatan Kerja Raya (“JKR”).  The claim is pending certification by JKR before submitting to MOF for approval;

(d) Negotiated and obtained a Deed of Assignment from the Main Contractor Related Party to pursue the receivables directly from the Government of Malaysia; and

(e) To commence legal action to recover outstanding receivables in the event of failure to recover the full amount.

In relation to the related party receivables due from the Main Contractor Related Party, subject to the finalization of the claim certification by JKR and the subsequent disbursement of payment from the Ministry of Finance, the Company expects the outstanding receivables to be fully recovered through progressive disbursements to be made by the Government of Malaysia not later than 31 December 2011.

With regards to the other outstanding related party receivables other than from the Main Contractor Related Party, the Company expects full recovery within 1 year from August 2010.

I do hope the various certification dapartments are doing their work. What they have not been doing is bleeding Metronic.

So much for Malaysia Incorporated and 1Malaysia.

Postscript:

The latest quarter-on-quarter result ending June 2010 showed major improvements in the accounts of Metronic.

Revenue has increased 77% from RM 2.269 million in 2009 to RM21.724 million in the current year.

From a loss of RM624,00 in the corresponding quarter of 2009, Metronic has turned in a profit  of RM3.427 million.

As for  profit attributable to shareholders, it also display a positive RM 2.532 million compared to  a negative RM497 million accrued in 2009.

Earnings per share has increased from negative 8 sen in 2009 to 40 sen in 2010.

If Metronic can step up its debt collecting ability, things will be rosy once more for this moribund company.

An Optimistic RAM Prediction of GDP 2010

RAM Ratings expects gross domestic product (GDP) to expand 7.4% for the year following the Government’s announcement that GDP grew 8.95 in the second quarter ended June 30, 2010.

The rating agency said in a press release that they agree that the country’s GDP growth will possibly grow at a slower pace of 5.6% in the second-half (H2), which was broadly in line with potential output.

It said H2’s slower pace of growth was due to “moderating external demand, fading low-base effects and easing re-stocking activities”.

Meanwhile, RAM Ratings said resilient domestic demand drove consumption to a 6.5% growth while a 9.4% rebound in investment activities in H1 contributed significantly to the rapid recovery.

According to it, private consumption “is expected to maintain upbeat momentum with a 7.7% growth for the year, slightly higher than the public-sector component, where growth is anticipated to reach 6.4%”.

RAM Ratings said changing trade patterns was holding up external demand.

“Export growth is attributable to sustained (and increasing) demand from newly industrialised economies and China,” it said.

RAM Ratings noted that this trend was expected to continue as Asian economies still power much of the current global growth momentum.

“For the full-year, exports are projected to expand 12.9%, with imports clocking up 18.3% backed by a pick-up in industrial and investment activities,” it said.

RAM Ratings has also maintained the estimated inflation rate of 2.5% for this year as the rate reflected increasing consumer confidence and the rise in food and transport prices following the Government’s subsidy cuts.

Looks like quite a rosy picture,don't you agree?

Decapitating GenM: Was It Systematic?

Yes, they have made mistakes before.

The latest foray into the UK may just be another bad deal given the more difficult gaming environment in Great Britain.

Yes, at the time of writing this blog, the Genting UK  suggested purchase has already been railroaded and approved at the EGM yesterday.

The purpose of this blog is just to find out just how much of the approximately RM6 billion reserve at GenM has been systematically whittled down.

Let us do our sums.

We will begin after the sell-off of a majority of shares in Star Cruises which originally cost the company USD442 million [RM1.42 billion].

The information I got was the coffers of GenM ex-Star Cruise sale of shares was slightly above RM5 billion. [If all the unnecessary purchases have not been executed, GenM would have close to RM6 billion by end of fiscal 2010.]

GenM then bought into 10% of Walker Digital Gaming for US$69 million (RM222 million)

Then last year, they arm-wrestled minority shareholders to acquire Wisma Genting and the Segambut property Oakland for RM284.1 million.

Now this takeover the UK operations using  more than one quarter of the GenM reserves.

And what about the USD50 million MGM notes. The money has to come from the reserves as well, right?

Then there is this gratis payment for the racino project at Queen's NY of USD380 million.

It looks like we have possibly burst all of the reserves given the feverish buy back of its shares recently as Treasury shares.

So, I do not see very much of the reserves of the RM5-6 billion left in GenM.

It has to start from square one, it seems.

What a whipping boy, GenM has turned out to be!

LTKM-A Counter to Watch?

From the answers given at its AGM today, it seems that LTKM  knows what it is doing besides being a low-cost egg farmer.

The highlights to consider will be the following.

The architecture glass factory will commence operations in early 2011. The market is huge for such glass as more green buildings come on stream. LTKM was fortunate to reduce costs on the project because of the weakening Euro in 2009. It shaved capex by 15%. It will take 3 years at least for LTKM to become a meaningful player  in this sector. For now, they are just expecting it to bring in a much needed diversified revenue stream.

The sand operations will possibly give a better performance. LTKM had some issues with the sand quality in Malacca but that is being overcome. Moreover the loss was because the housing industry in Malcca is not as vibrant as that of the Klang Valley.The second factory line will also be up and running soon and so sand supply will be another positive income source for LTKM.

In terms of dividend pay-out, there was some hoo-ha this morning at the AGM since only RM1 million was added to dividend pay-out. Dividend payout was 3% tax at 25% interim and  final at 7% single tiered.

Given the better prospects in 2010/2011, assuming the market is kind,expect LTKM  to perform.

Axiata's Dividend Policy Overture

Yes, Axiata has announced a string of impressive results for both its domestic operations as well as its foreign units.

As such, the company has also informed the shareholders to expect a 30% dividend payout of its earnings.

Alas, there was no pronouncement of any dividend payout at this juncture.

Registered net profit attributable to ordinary equity holders of the Axiata was up by 9.5% at RM576.82 million from RM526.84 million a year ago following improvements in all major operating companies.

Net profit was up 18.1%'' at RM675.51 million versus RM571.91 million a year ago. Revenue was RM3.85 billion compared with RM3.21 billion. Earnings per share was seven sen.

It said strong growth trends were seen across all major operating companies, again in almost all financial metrics. Revenue was up an impressive 20% year-on-year'' to RM3.9 billion from continuous overall performance from most operating companies (OpCos), particularly, Celcom, XL, Dialog'' and Robi.

'More substantially, earnings before interest, tax, depreciation and amortisation (EBITDA) grew by an impressive 38% in the same period to RM1.8 billion, outpacing revenue, partly due to strategic cost initiative programmes implemented early last year,' it said.

Axiata said EBITDA margin improved 6.3 percentage points to 47% on-year. Profit after tax and minority interest was up by 9% on-year to RM577 million.

Regional mobile subscribers for the group saw strong growth up 39% on-year to 138 million.

Axiata also announced its dividend policy where it 'intends to pay dividends of at least 30% of its consolidated profits after taxation attributable to shareholders'.

It added that it would endeavour to progressively increase the payout ratio over a period of time, subject to a number of factors including business prospects, capital requirements and surplus, growth/expansion strategy, considerations for non-recurring items and other factors considered relevant by the board.

So, perhaps some dividends can be expected before year end.