Moderate Upgrade for Axiata's Share Price

Following he recent DiGi and Axiata Celcom tie-up  ana;ysts are giving the thumbs up to Axiata for a buy. They based this on an expected cash savings of some RM2.2 billion over 10 years.

The two telecommunications companies, Celcom and DiGi had on Tuesday entered into a three-yearnetwork collaboration pact, where both parties will collaborate on sites, access transmission, aggregate transmission and trunk fiber transmission which will cover 218 sites under Phase 1.

Axiata remained OSK Research's top pick for domestic and regional telecoms exposure, given the strong prospects accorded by its regional mobile assets. It said the progressive ramp-up of sites over 10 years implies that the bulk of capital expenditure (capex)/operational expenditure (opex) savings would be back-loaded.

It gave a buy rating and a RM5.80 target price on Axiata, but maintained its neutral call on DiGi with a target price of RM24.40. OSK expects the cost savings from the collaboration to boost DiGi’s earnings from financial year 2012 (FY12) on top of the internal cost-down initiatives already in place.

"We believe the savings in terms of opex will be more apparent for DiGi, given that network cost constitutes 12% of DiGi’s revenue versus 10% for Celcom," it said in a report.

HwangDBS Vickers Research also gave similar calls on Axiata and DiGi, but lower target prices of RM5.10 and RM22.90, respectively.

It said that Celcom Axiata Bhd continues to do well especially in the broadband segment in addition to exposure in fast-growing overseas markets including Indonesia, Sri Lanka and Bangladesh.

Overall, HwangDBS said it is neutral on the DiGi and Axiata Celcom development, given expected marginal impact on FY12F earnings and its discounted cash flow-based (DCF) valuations.

"Assuming 50:50 capex to expense savings ratio (and 50:50 savings proportion between DiGi and Celcom), this could expand DiGi’s and Axiata’s FY12F Ebitda margins by 0.1-0.3 percentage points. It could also raise DiGi’s and Axiata’s target prices by 20 sen and 5 sen respectively," it said.

Meanwhile, Alliance Research has raised its FY12 earnings projection for DiGi and Axiata by 9.2% and 3.8% respectively. It also increased its target price for DiGi to RM26.50 from RM24.10, but maintained that for Axiata at RM5.42 per share.

It said the tie-up is timely as cost efficiency is pivotal in expanding margins given the saturated telco market in Malaysia and anticipates more similar tie-ups between players in the future.

To my best bet, it looks like Axiata will possibly ascend to the RM5.20 level at best bat.

KUB's Coup De Grace

KUB has dealt a deft masterstroke coup de grace by clinching 40% of a joint venture that would build and operate a 100 km inter-city transit system in Iskandariah with connections to metropolitan Singapore.

This project is   worth over RM1 billion and  is to be completed over 24 months. The concession period is 25 years.

Masteel and KUB has entered into a Joint Venture Agreement where Masteel and KUB would hold 60% and 40% equity stakes respectively in the JV company, Metropolitan Commuter Network Sdn Bhd.

.

Iskandar Malaysia is a huge regional development of the Federal government with an allocation of RM6.83 billion for its development.

Three years since its turnaround in 2008, KUB is focused on the   Property, Engineering & Construction (PEC) side of the contracting income for the immediate term while at the same time to grow its recurring income base.

This project will serve KUB Group not only in the Construction area, but IBS supply on Kempas Baru Development and Facility Management as well, being part of our PEC sector. KUB’s ICT sector will also benefit from the integrated IT systems on ticketing, collection and security.

The project has two components: the “Build-Transfer” of the rail transit infrastructure, and the “Own-Operate” of the inter-city train system. The project is to be undertaken in 3 phases, and expected to be completed within 24 months from project commencement.

The building of the rail transit infrastructure would also be funded by project financing under the Public-Private Partnership scheme (PPP).

KUB Malaysia Berhad is an investment holding company Malaysia, operating in the core business of Information, Communications & Technology (ICT), Property, Engineering & Construction (PEC) and Food-Related Industries.

In the area of PEC, KUB has spread its involvement in the government as well as private projects, amongst others, residential housing projects, vocational and industrial training institute, hospitals, schools, health and nursing Colleges, industrial and high rise buildings. Actively involved in the Industrialized Building System (IBS), KUB also own an IBS manufacturing facility located in Senawang, Negeri Sembilan, which has the capacity to produce 60,000m3 per year of Pre-fabricated Concrete Component such as Precast Columns, Beams, Walls and Staircases as well as 600,000m2 per year of Hollow Core Floor Slabs.

Leveraging on the experience from the PEC sector, KUB has continued to nurture and harness exposure from the experience in facilities management as a strategic platform to upscale its existing FM business through its Total Comprehensive Facilities Maintenance and Management Services.

In the area of ICT, KUB is moving up the value chain to position itself as a total ICT solution provider in Malaysia. Ranked as one of Malaysia’s most prolific ICT companies, KUB’s range of communication services include integrated solution in broadcasting and telecommunication, telecommunication network service and systems engineering services. 

Positioned as a specialist provider to Managed IT Services with its own in-house developed product called Probit, KUB also provides specialized services in systems integration; support and maintenance services, consultancy and IT project management.

The major shareholders of KUB are Gaya Edisi Sdn Bhd and Minister of Finance currently holds approximately 29.62% and 22.55% respectively.

Looks like KUB is going great guns. 

So watch KUB closely as it may just do a spirited run. It touched 92 sen today and may just hop, skip and jump beyond RM1 very soon if fortune star favours KUB.

Penang- Investment Powerhouse 2010

Yes, Penang has done it again!

In 2010, this island state ramped up foreign direct investment ofRM12.2 billion, topping all states in Malaysia.

This is more than one quarter of total investments into Malaysia for the year of RM47.2 billion as well as a jump of 465 per cent increase from 2009 according to figures just released by the Malaysian International Development Agency (Mida).

Chie Minister Lim Guan Eng attributed this runaway success to foreign confidence i n the island state's
energy, expertise and entrepreneurship of Penang’s human talent.

He claimed that with the best financial performance, the best state in clean governance, the best green practices and as “the newly-crowned champion amongst all states in attracting investments., Penang leads the way again!

He credited Penang’s success to the hard work of the state’s 1.6 million residents, together with that of the state government as well as federal government agencies such as Mida and the Ministry of International Trade and Industry.

Lim said this was the first time Penang had led other states in investments and was the highest figure ever achieved by the state, totalling 26 per cent of total investments in the country.

He said the success affirms the state administration’s strategy of promoting Penang based on the availability of skilled workers, efficient supply chain management, reliability as a logistics and communications hub, strong protection for intellectual property, good governance, building creativity and innovation in science and technology, and George Town as a liveable and intelligent city.

Yesterday, Minister of International Trade and Industry Datuk Seri Mustapa Mohamed announced a 45 per cent increase in Malaysia’s investment performance from RM32.6 billion in 2009 to RM47.2 billion in 2010.

Well, Penang seems to be doing the right thing. I do hope otehr states can take a leaf from this success to earn brownie points as well to attract foreign investment in 2011.

What is CSR

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Farewell, Susannah York

Another memorable star of the 1960's passed on. She died from cancer on 16 January 2011 at 72.

Another sad milestone.

Susannah York was one of the faces that I grew up with. She was most remembered as the pretty wench in Tom Jones.

Though, I was pretty young to see or understood such a raunchy show, I did remember the cheeky Susannah well.

God Bless her soul.

THe Property Outlook for 2011

Sherry Koh of the online STAR did a survey on some professionals as what would be the outlook for the property market in 2011.

While most developers talk about the positive effects of the government economic transformation programmes, the view of related parties were more credible.

5SM Faliq of Naza spoke of their signature project around the Matrade building. As usual, he was buoyant about prospects in 2011 and perceive a good demand pattern in spite of the government's loan to value cap on third banking  loans.

Another developer, the Sunway Group remains optimistic as well. Citing steady employment rate, ample liquidity and attractive financing packages, it demeed property still be the preferred inflation hedge. He cautioned that though demand will remain strong for landed residential properties, it will be confined to certain strategic locations in the Klang Valley. The shortage of supply especially in good locations will command good secondary prices while new launches will be much sought after.

It does not expect property bubbles as there are limited supply of land is limited in prime areas and

the availability of liquidity at the banks and institutions such as the Employees’ Provident Fund (EPF). Moreover,the latest round of quantitative easing by the US will see some funds inflow to this part of the world. 

The Sunway people believe the current demand for lifestyle living will help many  developers launch such schemes. They expect the trend to persist.  Today, developers are also designing houses with larger built-ups and surrounded by lush greenery to accommodate families wanting a green and spacious living environment, away from the hustle and bustle of city life. Security is another important factor which explains the demand for gated and guarded projects. Homebuyers will be attracted to new lifestylefeatures that are aesthetically pleasing and functional at the same time.

If 2010 is indicative of improved market conditions and a good year due to return of market confidence, Sunway believes 2011 will display positive progress with vibrant and competitive outlook chiefly, due to strong offerings from developers for customers.So, to them, quality properties  remain a safe and solid asset class. 

 Now, let us look at the view from the National House Buyers Association. It’s spokesman, Chang Kim Loong has this to offer. 

“Unless the Government does more to curb excessive speculation, property prices especially in urban and even sub-urban areas,house prices  will continue to rise beyond the reach of many wage earners, especially those fresh into the work force or about to start a young 

family. Even middle income wage earners with joint salaries are unable to buy in.

One should  notice that the pay cheque increase does not commensurate with the increase in

prices of residential property. People buy in on the premise that economy is growing or allegedly to be increasing. In an event of a downturn it would trigger a snow ball effect. Ask the man-on-the-street; don't just seek opinions of parties with vested interest i.e. developers, builders, real estate agents, property consultants who are property sellers”. 

This is very sane advice!

Now, let us look at what the real estate people has to say. Reapfield Properties, Gerard Kho

Expects the property market to remain buoyant and vibrant in 2011. He felt that it was difficult to  

specifically predict how much the market will continue to grow but he believes the market is sustainable

as  there are many rosy factors 

Firstly, inflation is going up and so will building materials go up in price. Secondly, there is upward pressure o nwages. Next, in-migration into urban areas calculated to be 3 million people into the Greater Kuala Lumpur area will cause housing pressure. Fourthly, improved infrastructure development such as the LRT and good networks will ensure growth. Finally, there is government stability. This will ensure investor confidence. The property market has been and will be a driver of the home economy. The real estate agency hope that banks can do their job in the area of home financing despite the LTV factor.

Let us have anotehr view from the real estate people. This time Sherry spoke to Khoo Boo Tee of Newfields Property. 

Khoo feels that last year’s buying momentum is still there and should continue. He expects a steady trend .

His reading is that developers will still be launching new projects and people will still be buying. Most buyers will live in their newly bought homes. He does not see any adverse effect from the government LTV measure.

Khoo is of the opinion that the threshold population is there. Looking at the Economic Transformation Program (ETP), he envisaged the population in Kuala Lumpur to be approximately 10 million by 2020. The current population is possibly 6 million, he added.

So, he sees a good property market in 2011.

So, that my friends,is what the picture for property in 2011.

Are you buying?

Malaysia: HSBC's Rosier Economic Forecast

No bumper growth rates and no severe slump too for Malaysia's economy. That is what HSBC Economist Wellian Wiranto has to say about Malaysia, adding that the country has recovered well from the effects of the
economic crisis.

"Exports staged a quick rebound, helped by inventory restocking and the increasing importance of intra-Asian trade," he said in the latest Asian Economics Quarterly last Friday.

Wiranto said private consumption continued to support growth, adding a complementing exports.

HSBC revised its projections, expecting the Malaysian economy to grow by 5.1 per cent in 2011 from 7.1 per cent in 2010 before slowing to a 4.9 per cent growth in 2012.

He said although the unexpectedly low spending in the third quarter of 2010 turned out to be the primary culprit behind the downside surprise, he does not expect the drag to persist for too long.

"Investment activities are moving along quite steadily. However, they are not yet expanding as much as the government would desire."

In terms of investment growth, HSBC has projected it to grow by 8.9 per cent year-on-year in 2010 and 6.5 per cent in 2011.

On the monetary policy front, Bank Negara Malaysia (BNM) stands out as one of the few Asian central banks not only to tighten, but to do so early on during the upcycle.

"The space BNM has created for itself with its normalisation drive should allow the central bank to pause during the first half of 2011, before resuming its normalisation drive," Wiranto said, adding that BNM can focus more readily on risks to growth over the near term.

It expects BNM to hike the Overnight Policy Rate by 25 basis points to 3 per cent in the third quarter and another 25 basis points to 3.25 per cent by the end of the year.

Meanwhile, the bank's Asia Pacific team, led by chief economists Qu Hongbin and Frederic Neumann, says growth in the region in 2011 should hold up nicely, leading them to tweak up the numbers.

"But, it's no longer just about Asian giants. China and India have clearly led the pack. But the real trend to watch is in Asian smaller economies, where the continued boom in trade is having the biggest impact."

The biggest growth upgrades, in fact, have come in Hong Kong, South Korea, Singapore, and the Philippines.

Thailand, for example, has bounced back impressively, while Indonesia will push growth up another notch.

But the impressive run by Asian economies (pumped by low rates and foreign liquidity) have "dire consequences", they warned.

Central bankers need to worry about rising inflation pressures, asset bubbles and excessive investment.

"All three symptoms are beginning to show in Asia. Still, there is sufficient time to delve into a diet of monetary tightening and avoid the pitfalls that have so often plagued this region before."

They said 2011 will be the year when the path is being laid: with growth strong and imbalances still manageable, policymakers had better practise prevention and wean economies off their artificial support.

Asia needs to tighten monetary policy rapidly and if it fails at this, it would need to brace for a harsh landing.

"The global output gap, in short, may help to contain Asian inflation somewhat, even if the region itself may increasingly be responsible for the universal climb in the price of major commodities," they added.

So, do you believe in all these analysis and predictions or are they mere humbug that any Tom, Dick and Harry can also predict?