PLUS-Quo Vadis?

This is Sharidan M. Ali's article in the online STAR. It tells about the latest goings-on in the PLUS takeover.

"As the final deadline of Jan 10 looms closer for PLUS Expressways Bhd to receive takeover offers, it seems almost certain that there will be only two.

One is a joint offer by UEM Group Bhd and the Employees Provident Fund (EPF), while the other is from little-known Jelas Ulung Sdn Bhd.

The new deadline is also for all offers to comply with several conditions to acquire PLUS’ businesses, such as coming up with a refundable RM50mil cash deposit and an unconditional written confirmation that the offeror has the financial ability to undertake the transaction and disclose more information about the bid, including the
funding source.

It is believed, however, that Jelas Ulung will have no problems complying with these conditions, including forking out the deposit, as it has already secured the credit to do so.

Jelas Ulung is a vehicle of Tan Sri Ibrahim Mohd Zain, who had earlier stated that he had secured the funding for the acquisition which had been arranged by a subsidiary of the Bank of China. “He appears to have secured the funding. So the company can comply with those conditions imposed by PLUS board. If that’s truly the case, then there’s little reason for the board not to recommend a premium bid for shareholders to vote on,” said a source.

This means that the independent directors of PLUS will have to deliberate on the two offers and decide which one to recommend to shareholders to vote at a yet-to-be-scheduled shareholders meeting.

UEM and EPF have offered to acquire the assets and liabilities of PLUS for RM23bil, which works out to RM4.60 per share, while Jelas Ulung’s offer is at a premium of RM26bil or RM5.20 per share.

For the acquisition via the asset-liability route, only a simple majority (50% plus one share) from PLUS shareholders at an EGM is sufficient for the deal to pull through.

An online news portal recently reported that PLUS was currently in the process of seeking clarification from the Securities Commission on whether UEM and EPF would be allowed to vote on Jelas Ulung’s offer in the event the competing bid was tabled to shareholders.

But a source said the report was not accurate, reiterating that Khazanal Nasional Bhd-UEM and EPF, as shareholders, would have the right to vote on Jelas Ulung’s offer at a shareholders meeting. However, the parties, which hold a combined 67.48% stake in the highway operator, will abstain from voting on their own takeover offer.

This means that the decision will hinge on minority shareholders holding 32.52% of PLUS of which 10.6% are foreigners (as at September 2010).

The remaining votes also belong to two other substantial shareholders – Retirement Fund Inc (KWAP) which holds 5.05% of PLUS and Perbadanan Nasional Bhd (and its related funds) of 8.55%.

Analysts said based on the offer price, Jelas Ulung’s proposal clearly looked more appealing.

“But, then again, it would be up to the shareholders to vote. In this instance, that includes UEM and EPF which also have a competing offer for PLUS on the table,” they said.

To recap, PLUS had on Oct 15, 2010, received an offer from UEM-EPF to acquire all its businesses and undertakings, including assets and liabilities, for RM23bil where UEM-EPF would incorporate a special-purpose vehicle for the acquisition, in which UEM and EPF would hold 51% and 49% equity interest respectively.

In mid-December, three days before the PLUS EGM to vote on the proposed acquisition, Jelas Ulung swooped in with its offer."

So, how will this bidding game be panning out?. Is it strictly economics or will the political hand wins the day?

This, we will see.

Berjaya Retail Berhad Bounces Back

Five long months! That is one long wait for a return from hibernation. Even bears come out of hibernation in a shorter time.

Today (7 January 2011), Berjaya Retail Berhad (BJR) has moved up again in its price to 56.5 sen ending the trading day a half sen lower at 56 sen. This is a significant development. Has it really build a firm bedrock to move up further ?

BJR was listed on the Bursa on 16 August 2010.It was not a fancied stock as its valuation was too rich when compared to Parkson. How the Securities Commission could have accepted such rich valuation is anybody's guess!

Prior to its listing, analysts gave it the Nero thumbs down almost immediately. Some analysts had valued BJR at only 51 sen, based on 14 times FY11 EPS, in line with their sector retail price-to-earnings ratio (PER) of 14 times.

Lo and Behold! True to their doomsday forecast,  BJR managed to open just 2 sen above the 50 sen IPO level. From then on it spin into a depression and went all the way down to 'Hole-land'. If I am not wrong, it went as low as limbo rock 36 sen. That was about five months back!

BJR operates the 7-Eleven chain of convenience stores while Singer markets and sells  consumer durables such as house-hold white goods via the brand name,Singer and also motorbikes on an installment basis.

In its listing prospectus, BJR has achieved revenue of RM418.9 million and pre-tax profit of RM9.99 million for its second quarter ended June 30, 2010.

As the group has only completed the business combination on June 14, 2010, there are no consolidated results available for comparison, BJR said one of its filings to Bursa Malaysia.

However, based on the proforma aggregate results of the subsidiary companies, 7-Eleven Malaysia Sdn Bhd and Singer (Malaysia) Sdn Bhd, the combined revenue and pre-tax profit for the previous year's second quarter ended June 30, 2009, were RM363.7 million and RM11.44 million respectively.

The increase in revenue was mainly due to the improved sales of motorcycles and electrical products by Singer Malaysia and opening of new convenience stores and improved average day sales per store by 7-Eleven, BJR said.

The lower pre-tax profit was mainly attributed to higher store maintenance and staff costs as well as higher operating expenditure incurred.

Similarly, based on the proforma aggregate results of its subsidiary companies for the earlier corresponding period, the group reported an increase in revenue of 14 per cent to RM834.7 million for the six months ended June 30, 2010, from RM731.7 million previously.

Pre-tax profit also increased but by a higher rate of 41 per cent from RM18.6 million to RM26.3 million this year.

So what is BJR's plans for 7-11 to expand its market shares and profitability after listing?

Among its plans are the expansion of its 7-Eleven franchise, offering new premium fresh F&B items and expanding its distribution network by opening yet another 150 new outlets in  2010. On top of that, it will open a new logistics center to maximize efficient receiving, processing and distribution of goods.

As for Singer, the current plans include the modernization and refurbishment of Singer branches,attracting  and generating sales from walk-in customers; and expanding its distribution network to 1,000 branches (from 561 branches in May 10 or +78%) within the next five years.

Now that the stock market has ran amok thanks to increased foreign participation, will BJR move up with the rising tide as a 'random walk participant' and fell as fast when the funds back-washed out of the country?

Or has BJR finally come out from its 'Hole-land' and demonstrate a new character on its own accord to attract serious investors which will hold it long term for the intrinsic strength that it is building, profitability  and for its openly declared 50% dividend policy?

Let us watch!

Maybank Takes over Singapore's Kim Eng Holdings

So the rumours have come true.

Maybank, through its wholly-owned subsidiary, Aseam Credit Sdn Bhd (ACSB), has proposed to acquire a 44.6% stake in Kim Eng Holdings Ltd today at S$3.10 per share. This means footing a bill for S$798mil or approximately RM1.9bil.

The conditional sale and purchase agreements was with Ronald Anthony Ooi Thean Yat and Yuanta Securities Asia Financial Services Ltd for the acquisition of 15.4% and 29.2% stakes respectively in Kim Eng.

Kim Eng is a leading stock broker in ASEAN with a top five position in Singapore, Thailand, Indonesia and the Philippines. It also has a presence in global financial centres, including Hong Kong, London and New York.

As of Sept 30, 2010, Kim Eng's total assets and shareholders' equity amounted to S$2.697bil and S$938 mil, respectively. Upon completion of the acquisition, Maybank will be required to make a mandatory general offer for the remaining 55.4% shares in Kim Eng, with an intention to privatise the company.
The total consideration for the acquisition of 100% of Kim Eng would amount to S$1.79bil (RM4.26bil).

The proposed transaction represents an acceleration of Maybank's investment banking and equities platform in ASEAN, addressing an important gap in Maybank's footprint, said Maybank Chairman Tan Sri Megat Zaharuddin Megat Mohd Nor in a statement today.

"Kim Eng gives us the immediate platform to aggressively build up our global wholesale banking capabilities in Asean and beyond. "Immediately, Kim Eng, gives us an entry into Thailand," he said.

So it's throwing one stone and getting many birds at one go.

Smart move, Tiger Bank!

Looks like a Slower H2

Jeeva Arupalam writes i nthe online STAR about the ebbing fortune for growth in Malaysia comes the second half of 2011.

Read his whys and wherefores below.

" The first half of this year would see slower economic growth due to last year's high-base effect, before growth expands in the second half as economic activities pick up steam.

Private consumption would help sustain the country's economic growth in the first half this year (1H11) due to the low interest rate environment, while recovering export growth and stronger private investments growth will spur overall growth in the second half of the year (2H11).

According to economists contacted by StarBiz yesterday, local gross domestic product (GDP) estimates for 1H11 range between 3.6% and 4.7% while local GDP forecasts for 2H11 varies from 5.9% to 6.5%.

“We have reduced our full-year GDP forecast this year from 6% to 5.5% and expect dampened sentiment to weigh on first-quarter (1Q) GDP results due to easing of external demand. If it was not for domestic demand, it could been much worse,” said AmResearch Sdn Bhd economist Manokaran Mottain.

According to the Department of Statistics, Malaysia's November exports last year expanded 5.3% year-on-year (y-o-y) to RM52.7bil. The numbers when compared with the preceding month was a decline of 4.1% due to comparatively lower demand from key developed markets, particularly for electrical and electronic products.

In a report yesterday, Manokaran said the exports performance clearly reflected easing external demand as well as the disappearance of the low-base effect from 2009.

“It also reflected the loss of competitiveness from the appreciation of the local currency against the US dollar. The ringgit was trading at an average of 3.1166 per dollar in November 2010 against 3.3894 during the corresponding month in 2009,” he said.

Manokaran expects similar performance for December 2010 and maintains an export growth forecast for 2010.

“We are now looking at a smaller growth of 4.3% in the final quarter of 2010, after a disappointing 5.3% GDP growth in third quarter of 2010, which will drag the full-year growth much lower,” he said.

AmResearch quarterly GDP growth forecasts for 2011 include 4.2% for 1Q, 5.2% for second quarter (2Q), 5.8% for third quarter (3Q) and 6.6% for fourth quarter (4Q).

Manokaran said the economic growth in 2H11 would be driven by spending on government-related projects under the Economic Transformation Programme (ETP) and the 10th Malaysia Plan.

Economists agreed that the implementation of the entry-point projects under the ETP would only be felt in 2H11, subject to early project announcements in the current quarter.

MIDF Research chief economist Anthony Dass said private consumption would remain resilient and grow by 6.7% this year, supported by a healthy liquidity flow as well as positive terms of trade and commodity prices.

Anthony said that private consumption would be the driver in the 1H11 due to the low interest rate environment, but adds that the overnight policy rate could see a 50-75 basis points hike this year.

MIDF Research quarterly GDP growth forecasts for 2011 include 3% for 1Q, 4.2% for 2Q, 5.4% for 3Q and 7.5% for 4Q.

In his report yesterday, Anthony said the economy would face a tough hurdle to see exports pick-up in 1H11 underpinned by global uncertainties that will continue to dampen external demand for electrical and electronics and stronger ringgit against the US dollar at a projected average of 3 per dollar this year.

“We think commodities would lend support to our export growth, backed by sustainable demand from China and India, who are significant consumers of raw materials. This would keep commodity prices firm this year,” he added.

MIDF Research has projected that crude oil price to average at US$105 per barrel and crude palm oil at RM3,400 per tonne this year.

Affin Investment Bank Bhd economist Alan Tan said the local economy would be supported by private investments and consumption as well as a more synchronised external recovery in the 2H11.

“The US and EU will likely show slower growth in the first half but the global economy is expected to pick up in 2H11,” he said.

Affin quarterly GDP growth forecasts for Malaysia in 2011 include 3.9% for 1Q, 4.2% for 2Q, 5.5% for 3Q and 6.3% for 4Q."

The Day the Bursa Ran Amok!

Yes,taking the cue from data signaling the recovery of the US economy,the Malaysian stock market almost went ballistic!

This is Lee Kian Seong's report in the online STAR today.

The FTSE Bursa Malaysia KLCI hit a new high yesterday, closing 18.47 points higher at 1,551.89, on high volume and positive investor sentiment.

Trading volume swelled to over two billion shares as investors were cheered by encouraging data from the United States and regional markets buoyed by rising liquidity.

After a long absence, Malaysia is also back on the radar screen of many international houses.

HwangDBS Investment Management  head of equities Gan Eng Peng noted that last month, manufacturing in the United States grew at its fastest clip in seven months, sending US stocks to two-year highs.

“Investors' reaction was supported by encouraging data from the United States that suggested the economy is improving. Stocks in the United States did well on the first day of trading for the year, and investors call it the January barometer',” he told

StarBiz.Data released in the US on Monday indicated that the manufacturing sector grew in December at its fastest pace in seven months, reinforcing recovery signs.

Gan said foreign investors were increasingly confident about investing in countries like Malaysia.

“For the first time in many years, international research houses have recommended Malaysia as a stock market investment destination over and above many other markets in Asia Pacific .

“If you take this in the context where foreign ownership of stocks remains near historic lows, there could be a lot more buying activity, going forward,” Gan said.

Among the top gainers yesterday were British American Tobacco (M) Bhd which rose 60 sen to RM46.40; Sime Darby Bhd (+ 51 sen to RM9.46) while Nestle (M) Bhd (+42 sen to RM43.84) .

Gan said the multiple catalysts announced under the Economic Transformation Plan (ETP) and Budget 2011 would essentially benefit key stock market sectors like construction, building materials and property.

The ETP, if successfully implemented, would help to sustain the momentum.

An analyst from a local investment bank said the gains yesterday on the local bourse was in line with performance of the regional markets with positive news flow from the expected elections in Malaysia.

He said the current resistance level was between 1,560 and 1,570 points while support is between 1,505 and 1,500 points.

Fortress Capital Asset Management chief executive officer Thomas Yong said the rally in the stock market was not only in Malaysia but across regional markets where there was a lot of liquidity.

“Bond yields are currently very low and it is also expensive to invest in bonds. Thus, equities continue to be the preferred instrument at this point of time.

“It is not surprising that the market is going up but it has to do with more than just the expected elections this year,” Yong said.

Investors are moving back into their positions in the market after easing off in the last one month and they are accumulating stocks again.

“Foreign money has been coming in since middle of last year but it is not really huge in terms of large inflows. Certainly, there has been foreign buying but it is more from local investors,” Yong said, adding that commodities-related stocks were favoured by these funds.

It is not easy to judge whether the stock market momentum is sustainable but Yong believes it will sustain in the short term. However, the market is expected to be fairly volatile this year.

On the market risks, Yong pointed out that interest rates were expected to rise later this year and this could affect sentiment.

“Investors expect to see between 15% and 20% growth in corporate earnings in Asia this year. If the growth is not seen in the coming months, market confidence may be affected,” Yong said.

Looks good but beware. Remember market fortunes are made on how early you enter and how good is your timing on leaving counters.

Alchemists and Soothsayers for 2011

Yes, the data has just come in.

Contrary to what was written by many external sources,this one is a definite departure.

Stock market sees seven months of net foreign buying

If you believe easily, then read what Kuala Lumpur-based Credit Suisse Group AG analyst Tan Ting Min has stated  in a Tuesday report about the in-flow of foreign funds in to Bursa KL. Apparently statistics has bailed her out as  foreign funds has bought RM2.6 billion worth of shares in December,rebounding from RM900 million in November following RM1.8 billion worth of purchases in October. This represents  seven consecutive months of net foreign fund inflows spurred by  a strengthening ringgit and measures by the Government to boost the economy.

“The stock market will be driven by liquidity, supported by a robust economy, rising commodity prices and a stronger ringgit,” she said.

Tan added that efforts to transform the economy to attract investments would also boost the market.

Among her stock picks were CIMB, Public Bank while Gamuda and IJM Corp were key beneficiaries
of the Economic Transformation Programme.

Tan said UEM Land, AirAsia and Axiata were also stocks to look out for.

If you are a trader,take this with a pinch of salt and head for the doors when such analysts stop saying anything good about the market!

MK Land and the Mystery Land Buyer

Yes,MK Land is selling out some prime pieces of land to raise cash.The interesting twist is not in the court of MK Land but rather who are the buyers.

Let's go on with the story.

MK Land will sell to a  little-known Foster Estate Sdn Bhd two pieces of land in Damansara Perdana, Selangor, for a combined RM130 million.

And what do you know? According to the Companies Commission of Malaysia, Sumami Kiman and Saharuddin Abdullah hold one share each in that RM2 company.

What makes its almost an Agatha Christie book is these two were also the same shareholders of Jelas Ulung Sdn Bhd, which is making the bid to buy the strategic mammoth PLUS.

Jelas Ulung was also rumoured to be the vehicle for Tan Sri Halim Saad although this was denied by people close to the businessman.

Foster Estate was set up on November 4 2010 and is based in Klang. Its core activity is property investment.

According to MK Land chief operating officer Lau Shu Chuan, proceeds from the land sale will be used to carry out existing projects and new ones over two years.

The deal is due to be completed by the end of this year. In a statement to Bursa Malaysia, MK Land said it has no immediate plan to develop the land.

MK Land is selling two parcels of land in Damansara Perdana, comprising 7.4ha and 3.3ha for RM100.8 million and RM29.2 million, respectively.

The developer had bought the land in April 2000 for RM5.9 million and RM2.4 million, respectively.

Damansara Perdana sits next to the thriving Kota Damansara township and it is also close to the new planned development of the Rubber Research Institute Land in Sungai Buloh.

So,what plans have the RM2 company for these pieces of land as it sits comfortably next the the MRCB managed Sg. Buluh giant property project?

As for MK Land, as the Chairman is vacating his seat this year,a substantial amount of his personal loans to MK Land will certainly be paid out from this land deal sale,I am sure.

I expect MK Land to turn the corner this year!