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!

Property 2011-A Mixed Bag

Angie Ng of the STAR reviews the property market and its potential in 2011 and came away with different outlooks for different pockets of the sector.

Every one of course concur with her that 2010 was quite an eventful one for the local housing market with strong demand and record prices registered in key property hot spots that included the Klang Valley and Penang.

Concerns over potential overheating had culminated in Bank Negara’s imposition in early November of a maximum loan-to-value ratio (LVR) of 70% for third home mortgages.

Buyers of landed properties in sought-after locations have benefited from good capital appreciation, with prices appreciating by between 20% and 30% year-on-year.

Most of the home-buying activities were fuelled by cheap cost of funding and huge liquidity in the banking system.

So, what is in store for 2011? Will home sales and prices continue to strengthen or will they sustain at current levels or start to head south?

CB Richard Ellis Sdn Bhd executive chairman Christopher Boyd believes the prices of landed properties in the Klang Valley and Penang will continue to rise, supported by a strong economy, which will be spurred by heavy expenditure on infrastructure and other projects, and high commodity prices. However, the effect in Johor will be more muted because demand has not been so strong.

“I believe the root cause of the strong growth in landed property prices in the Klang Valley and Penang in 2010 was a reduction in supply which followed the global economic crisis. Developers simply turned off the tap for a while until the future became clearer, and this is supported by data from the National Property Information Centre.

“The economy and confidence soon bounced back and so the result was a temporary supply squeeze which of course will ease this year as developers increase supply,” Boyd says.

As finance is still cheap and confidence remains high, he expects landed property prices to continue to rise in value, albeit at a slower rate. However, luxury high-rise residences in the Kuala Lumpur City Centre and Mon’t Kiara localities will continue to face a challenging market in view of ample supply and weak rental demand.

“Well-located medium-cost high-rise dwellings will remain in strong demand from younger middle-class buyers and we will see a continuation of the trend towards building small affordable units close to the central business district.” Boyd does not see any material impact from the 70% LVR ruling on third mortgages but says it is nevertheless a very timely message “that one has to be careful not to over-commit because prices may level off, making it more difficult to exit.”

He says the redevelopment of the Rubber Research Institute land in Sg Buloh and the Sg Besi airport has the potential to be phenomenal success and will benchmark Malaysia’s skill in producing large-scale developments of a very high quality.

According to ECM Libra research head Bernard Ching, property sales and price appreciation are expected to moderate in 2011.

He expects slower speculative demand due to the central bank’s LVR cap. Furthermore, the intense competition among banks in the mortgage market is not sustainable as net interest margins (NIMs) have compressed to very low levels.

He believes that banks may have to raise rates and/or cease offering zero-moving cost mortgages to alleviate further pressure on NIMs. This will result in higher financing costs to house-buyers. On the outlook for the commercial property sector, Boyd says there will be further upsides in the office market, especially if the country’s economic recovery is sustainable.

“I believe that with the right planning, the office market can be easily well balanced in terms of supply and demand. The Klang Valley office space market will remain quite resilient this year in the face of only moderate new supply and quite buoyant take up.”

Boyd estimates a further 3.5 million sq ft of office space would be completed in Kuala Lumpur this year.

He says it is more of a seller’s market right now as there is not enough investible buildings around to meet demand. Given the lower entry cost, demand is getting stronger especially for office buildings that are well managed and located, have high occupancy and good yields.

“Similarly, the retail property sector is likely to strengthen slightly in 2011 with only moderate new supply and strong demographic of a young and growing workforce,” he adds.

On the interest for commercial property, Boyd says that in the aftermath of the global financial crisis, while commercial rentals fell, the capital value of commercial property held up well.

“The reason for this is that investors had become severely disillusioned with stock markets and were still prepared to pay competitive prices for income-yielding commercial property, so in fact yield expectations dropped.

“This is a phenomenon that was seen all around the globe,” he says.

So, that is the way the cookie will crumble?

Let us see the new year out for the property market.

BLand: Hibernation Mode for Now

Berjaya Land Berhad (BLand) will be the counter in the Berjaya Group stable to watch as it has really gone no where in 2010.

If the BJToto counter is really privatised, then BLand will be the direct owner of the number forecast gaming company that owns about close to 40% of the NFO in Malaysia. Then it will be going places.

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Let us look at some of the development or sadly non-development of BLand.

The first project held in long hibernation relates to the

:

(1) Proposed acquisition of about 244.79 acres of leasehold land located in Sungai Besi (“Sungai Besi Land”) together with all existing buildings and structures erected thereon by Selat Makmur Sdn Bhd ("SMSB"), a 100%-owned subsidiary of Bland, from Selangor Turf Club (“STC”) for a total consideration of RM640.0 million ("proposed acquisition of Sungai Besi Land"); and (2) Proposed acquisition of about 750.0 acres of freehold land located in Sungai Tinggi (“Sungai Tinggi Land”) by SMSB from Berjayacity Sdn Bhd (“BCSB”) and the proposed appointment of BCSB as the turnkey contractor to carry out the construction of the new turf club for a total consideration of RM605.0 million (“proposed acquisition of Sungai Tinggi Land”) Both of these are collectively referred to as the “proposals” And now what is the status?

For starters, the Board of Directors of BLand ("Board") wishes to announce that STC has officially notified SMSB via a letter dated 27 December 2010 granting a further extension of time from 19 January 2011 to 18 January 2012 to fulfill the conditions precedent pursuant to the Proposed Acquisition of Sungai Besi Land. Details of the conditions precedent which have yet to be fulfilled as announced on 16 August 2010 are as follows:- (a) renewal of consent by Land and Mines Department (Federal) for the transfer to SMSB of the portion of Sungai Besi Land (held under H.S.(D) 61790 No. P.T. 2872 in the Mukim of Petaling, District and State of Wilayah Persekutuan) that resides in Wilayah Persekutuan Kuala Lumpur which had expired on 11 January 2006; (b) agreement being reached between STC and SMSB on the layout plans, building plans, designs, drawings and specifications for the New Turf Club. Pending the fulfillment of Item (c) below, STC and SMSB have not finalized the layout plans, building plans, designs, drawings and specifications for the New Turf Club; and (c) the approval, permit or consent of any other relevant authorities as may be required by applicable laws include inter-alia the following:-   (i)                approval from the Town and Country Planning Department of the State of Selangor on the re-tabling of the amended master layout plan which was re-submitted on 19 August 2008; (ii) approval from the Majlis Daerah Hulu Selangor for the Development Order, earthworks and infrastructure and building plan pertaining to the construction of the New Turf Club after approval under Item (c) (i) above is obtained; and (iii) approval from the State Exco of Selangor for the conversion and sub-division of Sungai Tinggi Land after approvals under Item (c) (i) and (ii) above are obtained. Now let us move on the next project. Proposed Development of a of a resort-type residential & commercial complex in Yerae-Dong, Seogwipo-Si, Jeju special self-governing province ("project ") Berjaya Jeju Resort Limited, the joint-venture company undertaking the of Jeju’s Casino Resort Project has yet to obtain the casino licence. The issuance of the casino licence is conditional upon, inter-alia, completion of the construction of the hotel. The proposed full-fledged casino will be housed in the hotel which forms part of the Project development.   This is the latest up-date. Not very promising,yah?