KNM’s orderbook balloons to above RM4 billion

by Jonathan Chia jonathanchia@theborneopost.com. Posted on December 23, 2010, Thursday

KUCHING: KNM Group Bhd’s (KNM) orderbook of above RM4 billion should be able to keep the company busy for the next two years. The company’s current tenderbook stands at more than RM16 billion.

BIOMASS ENERGY GENERATION PLANT: KNM recently announced that its 100 per cent subsidiary KPS, has entered into an EPC contract to generate energy from biomass and a waste recycling centre known as ‘EnergyPark Peterborough’ in Peterborough, the UK. — Photo by Agragas, Inc

KNM recently announced that its 100 per cent subsidiary KNM Process Systems Sdn Bhd (KPS), had entered into an engineering, procurement and construction (EPC) contract towards the development of a plant with gross capacity of approximately 80 megawatts (MW) to generate energy from biomass and a waste recycling centre known as ‘EnergyPark Peterborough’ in Peterborough, the UK.

The contract from Peterborough Renewable Energy Ltd (PREL), valued at £450 million (RM2.2 billion) would cover the duration of about four years starting from the commencement date which was yet to be determined.

“We gather that the amount would likely be equally spread over the four-year period, which would amount to about RM500 million a year.

“We also understand that this EPC project includes the structural construction, which would likely be carried out by a third party, the gross margin expected to be more than 20 per cent and although the commencement date is yet to be determined, there is no risk to KNM as we understand that the deposit received by the company is enough to cover the cost of initial material to be purchased,” said OSK Research Sdn Bhd’s (OSK Research) analyst, Jason Yap.

Yap noted that there was no change to KNM’s financial year 2010 (FY10) to financial year 2011 (FY11) earnings.

“This is because we had earlier assumed some orderbook replenishment for the company based on the success rate guidance from its management,” he added.

Given the positive investor sentiment on the stock, he believed there would be more upside to its share price since this stock was traditionally driven by positive news flow such as contract announcements.

Hence, OSK Research was upgrading its target price for the company to RM3.45 per share, which was based on a higher price earnings ratio (PER) of 14 times FY11 earnings per share (EPS).

“Our valuation is slightly higher than the current industry average of 13 times because we believe that at the rate the share prices of most oil and gas (O&G) companies are performing, we think that the industry average would soon catch up to 14 times.

“As for KNM, we believe its share price would react positively to this big one-off contract in the short term,” Yap said.

However, as for the longer term sustainability of its share price, he believed that investors would need more assurance in the form of continuous contracts flow, on which he was still not entirely certain since the global O&G industry had not fully recovered in the past 12 months although crude oil prices had stabilised at about US$80 per barrel.

Yap noted that KNM was a global O&G process equipment company, which made its business dependent on the health of the global economy and not Malaysia alone.

http://www.theborneopost.com/?p=81848

Padini plans more stores

By June Ramlee
Published: 2010/12/23

However, Padini is concerned about the labour shortage and the inability of getting Malaysians to work in the retail sector

PADINI Holdings Bhd (7052)plans to open more Brands Outlet stores, which sells cheaper value brands, in 2011 but it is worried about a local labour shortage for the retail industry.

"What concerns me is the labour shortage and the inability of getting locals to work in the retail sector and make it a career that not many people are willing to invest their lives in," executive chairman Chan Kwai Heng said.

This is why Padini's expansion plans in Sabah and Sarawak has suffered a setback as there were not many capable people who could do the job.

"Between Sabah and Sarawak we have three stores ... we want to expand more here but we are looking for the right person who can handle the retailing side of the business," he added.

The company now has 12 Brands Outlet stores nationwide.

"We are going to expand the Brands Outlet store to many states in Malaysia but we are not sure of the number yet," he added.

Padini's revenue grew 9.5 per cent to RM520.9 million in 2010 over RM475.5 million in 2009.

Its most profitable business was women's footwear Vincci which garnered a revenue of RM173.2 million compared with RM160.3 million the previous year.

Chan said the group doesn't plan to expand its brand presence overseas as it still has a lot of room to grow within the country.

"The Economic Transformation Plan (ETP) report says that in 2009 the apparel and footwear industry in Malaysia was worth RM13 billion. Now our revenue is only at RM520.9 million, so we still have a lot of room to grow here," he said.

He is also not worried about the rise in cotton prices due to bad weather as it could lock in prices earlier through the futures market.

Padini expects a single-digit growth for the fashion industry next year as there are not many big events to help push sales.

"There is no Visit Malaysia Year next year, but I am very interested in the ETP ... if it works, then it will be good for the industry," he added.

Read more: Padini plans more stores http://www.btimes.com.my/Current_News/BTIMES/articles/jrpadini/Article/index_html#ixzz18vTicDGR

Pheim, CEO appeal on stock-rigging case

Pheim Asset Management Sdn Bhd and its Chief Executive Officer Tan Chong Koay, appealed a Singapore High Court ruling that they’d manipulated the shares of a listed company in the country’s first civil stock-rigging lawsuit.

“If left to stand, the decision would either serve to curtail genuine market activity by the timorous or to set a penal trap for the unwary,” they said in their appeal filed Dec 21 at the Singapore High Court.

Tan and Pheim bought almost 90 per cent of the traded shares of United Envirotech Ltd. from Dec 29 to Dec 31, 2004. The shares rose 17 per cent over the three trading days and helped raise the net asset value of the fund management firm’s accounts, triggering bonuses of S$50,790 ($38,866) and a management fee of S$115. Justice Lai Siu Chiu said the gain sought by Pheim and Tan wasn’t monetary, in ruling they manipulated the stock.

Tan and his Malaysian fund management company were fined S$250,000 each. The Monetary Authority of Singapore sought a fine of S$1 million for each.

Pheim “is a value investor,” the company and Tan said in their appeal. “Pheim is also a contrarian investor -- buying when others are selling and selling when others are buying.”

The Monetary Authority has no evidence to prove Pheim and Tan had any other intention but to buy undervalued shares, they said in the 212 pages of court documents filed to back the appeal.

“There was in fact no other intention,” they said.

‘Good Investment’

Pheim expected shares of companies in the water treatment sector to rise since 2001, according to the filing. United Envirotech shares were overlooked and deemed to be a good investment, Pheim said in its appeal.

Singapore, which expanded its fund management industry to a record S$1.2 trillion at the end of 2009, has vowed to clamp down on market abuse. The central bank, which won the city’s first civil lawsuits for stock rigging and insider trading this year tightened the rules for financial institutions in reporting employee misconduct.

“Such offenses undermine the effectiveness and efficiency of the securities market and are often insidious and difficult to detect,” Lai said.

Tan, who founded Pheim Group, was in 2002 named one of five successful Singapore-based boutique fund managers by the Government of Singapore Investment Corp..

Tan has offices in Singapore and Malaysia. He had said, jokingly, in August 2006 that Pheim, which manages about $1 billion, was a made-up word which means Please Help Everyone Invest Money.

Tan and Pheim “would not have risked their livelihood and business by seeking to manipulate” the stock knowing that any unusual trading activities would be tracked by the financial regulator, according to their appeal.

The case is Pheim Asset Management Sdn Bhd v Monetary Authority of Singapore, CA186/2010 in the Singapore High Court. - Bloomberg

Read more: Pheim, CEO appeal on stock-rigging case http://www.btimes.com.my/Current_News/BTIMES/articles/20101223112041/Article/index_html#ixzz18vQHvfh9

Trading versus Investing

Saw these interesting postings in Blackspy fundamental blog.  

There is a saying:  "It is not a sin when you buy a stock at its low price."  This implies that one is able to value the stock confidently, thereby knowing the probability of upside is higher than the probability of the stock going down.  

What can we learn from the actions of Alam Maritim Chairman below?  Many 'investors' in the stock market are using such a strategy already.  Is this a strategy one can employ profitably, safely and consistently? 

-----

Alam Maritim Chairman disposed 100,000 shares back to market

Still remember DATO' CAPT AHMAD SUFIAN BIN QURNAIN @ABDUL RASHID acquired Alam Maritim 100,000 shares on 10 Dec 2010 at my previous post??
http://hongwei85.blogspot.com/2010/12/alam-maritim-chairman-acquired-100000.html

Now he disposed back all the 100,000 shares to open market again~ sign -_-"

On 10 Dec 2010, he acquired 100,000 shares at the price RM 0.89
On 14 Dec 2010, he disposed 30,000 shares at the price RM 1.04
On 16 Dec 2010, he disposed 25,000 shares at the price RM 1.04
On 17 Dec 2010, he disposed 45,000 shares at the price RM 1.056

Just in one week, Dato earned about RM 15k in open market.

Here is the earlier post of when the Alam Maritim Chairman bought the stocks.

Alam Maritim Chairman acquired 100,000 shares.

DATO' CAPT AHMAD SUFIAN BIN QURNAIN @ABDUL RASHID acquired Alam Maritim 100,000 shares at 10 Dec 2010.


Why he bought it? He has too much cash and do not know where to spend?
No no! He knows somwthing is worth by putting his money in this company. Nobody know how the company is running other than chairman.

Post modified: 23.12.2010
Here is another portfolio of a trader (copied from a blog)

I'm a long term investor, not so much on daily trading, slowly allocating part of my money into short term trading. Below is my year 2010 investment portfolio and total profit received. Can those active short term traders share your portfolio? I would like to benchmark my trading method to see if long / medium term investment is more lucrative or short term active trading is more lucrative.

Purc. Date Stock Buy Value P Unit C Unit Cost Dividend Sell Price Profit Selling Date Total Month Hold
19-Apr-10 GPacket 1.15 3 3 3,495.04 0 0.92 -735.04 11-Oct-10 6
9-Dec-10 Pchem-ca 0.335 10 10 3,390.00 0.41 710.00 9-Dec-10 1
26-Nov-10 Pechem 5.04 2 2 10,080.00 5.4 720.00 8-Dec-10 1
26-Nov-10 Pechem 5.04 6 6 30,240.00 5.6 3,360.00 9-Dec-10 1
4-Oct-10 Supermax 4.18 1 1 4,200.00 0 4.41 210.00 8-Dec-10 3
11-Mar-10 Maybank 7.5 1 1 7,555.25 0 9 1,444.75 11-Oct-10 7
11-Nov-09 Maxis 4.75 1 1 4,780.00 390 5.34 950.00 11-Oct-10 12
18-Feb-10 Genting 6.65 0.5 3,350.00 10 1,650.00 11-Oct-10 8
18-Feb-10 Genting 6.65 0.5 2,850.00 10.8 2,550.00 22-Dec-10 10
23-Feb-10 BJTOTO 4.25 2 2 8,562.55 320 4.17 97.45 8-Nov-10 9
1-Dec-09 Gamuda 2.81 1 1 2,850.00 100 3.83 1000.00 21-Dec-10 12

Total profit made: around 11,957.16 (some of the shares I didn't keep track of brokerage fees)

The amount of capital he employed into his portfolio peaked on 26th November 2010.
The total amount at risk was = 2,850 + 2,850 + 4,200 + 30,240 + 10,080 =50,220.
His profit of 11,957.16 gives a return of 23.8%.
His individual stock holding period returns will be higher.

Since January 2010, the KLCI index has risen from around 1250 to 1500, giving a return of 20% for the year.

Does crowd mentality influence your investment?

The BSE Sensex has multiplied six-seven times over the last decade. And many stocks have sky-rocketed. Some investors have made money. Others have lost money. And most people continue to lose. Strikingly, most people also do what most other people do. Isn't that quite a coincidence? 

In our previous article on crowd mentality, we had emphasised the need to keep away from crowds and to stay focused on company fundamentals. Now let us understand some dynamics of this phenomenon called 'crowd'. We have all had our share of experiences at 'becoming a crowd'. Let's recount some. 

Situation/ Activity	Our response in a crowd
Watching a cricket match in a jam packed stadium	We end up yelling and cheering more than we would otherwise if watching alone on TV.
In a professional company meeting	We're prone to agreeing more often than not.
In Bombay local trains	Need we say anything?
The 2007 bull run. The 2008 crash	Remember???

Let's look back at these common experiences with a different perspective. Of all, one thing is quite clear: 

Being part of a crowd causes people to behave differently from the way that they would in isolation. 

Crowds introduce a very overwhelming emotional and often irrational element to decision-making: making an individual equate his own needs with those of the crowd. This is particularly noticeable in financial markets. At peaks and troughs of the stock market, for example, very few people will be concentrating on the fundamental economic influences. The vast majority will be concerned with only the recent short-term movements in prices themselves. Consequently, this majority will inevitably be on the wrong foot when a price reversal occurs. 

People who have spent a decent amount of time investing in stocks must have often felt a two-way pull on their decisions. Their 'personal' approach may suggest one course of action. On the other hand, the lure of the 'herd instinct' may be pulling entirely in the opposite direction. This is true even for a lot of seasoned professionals. The reason for this two-way pull lies in these two primary tendencies- 

Self-assertive tendency: the ability to behave in a self-determined way. 

Integrative tendency: the willingness to belong to crowds. 

What we ultimately do depends on which of these two tendencies stands prominently in us. 

A crowd is something other than the sum of its parts 

A crowd is a psychological phenomenon. Its formation does not really require the physical presence of its members. All that is needed is a common cause. The most striking peculiarity of a crowd in a financial market is this: 

The individuals composing a crowd may be very different from each other. They may differ in their lifestyles, their character, or their intelligence. But the fact that they have been transformed into a crowd puts them in possession of a sort of collective mind. And the way they feel, think and act gets altered drastically. 

Doesn't this remind you of chemistry lessons? Two or more different elements combining together. Then transforming into a compound whose characteristics are quite distinct from that of its components. Ditto for investors! Successful investment, therefore, depends on an individual's ability to stand aside from the crowd's influence.




Equimaster

Marc Faber: "If you cannot swallow a 30% correction in whatever you buy, then don't even get up in the morning from your bed."

A 30% correction in emerging markets?

More money than you can imagine. Billions and trillions of currency notes. The Fed's quantitative easing program sent a lot of cheap money floating around the world. This money directly found its way to emerging markets. With high interest rates, and strong economic recoveries, the flow of money in this direction was but obvious.

For a while, increased cash makes everyone feel happy. FIIs pumped in a total of US$ 29.3 bn in India so far in 2010. This sent stock prices soaring. The very same stocks which were selling at their lows a year back, reached their lifetime highs. Stock markets climbed quickly to their previous peaks.

But, was the excess money even needed in the first place? Increased inflows of money have led to inflationary pressure, currency appreciation and asset bubbles forming in these countries. According to Nobel Prize-winning economist Joseph Stiglitz, these are "considerable risks". So, how do the emerging markets react? Well, economies from San Paulo to New Delhi have been trying hard to control these volatile capital inflows. Brazil raised its taxes on foreign bond purchases by almost three times. India tried to raise interest rates to stem rampant inflation.

But now, India has inadvertently done something to further reduce FII inflows. The recent bribery scams, stock price riggings and political uncertainty led to FIIs dropping Indian stocks like hot potatoes. The pace of FII inflows has slowed down considerably over the past three months. Marc Faber believes that emerging markets could easily see a 20-30% correction. Tightening monetary conditions, high crude prices and food supply concerns are all adding to the mess.

But, if you bought the right stocks at the right valuations and with the right management, you may still be safe. We believe that Faber has it right by saying that if you cannot swallow a 30% correction in whatever you buy, then don't even get up in the morning from your bed.

Equimaster

Do you invest in what you don't understand?

Principles of value investing have helped create legends of the likes of Warren Buffett and Peter Lynch. The principles are simple and easy to understand. Pick a sound business that is available at cheap valuations. And then hold it till such time the value is realized.

But the most important principle is to invest only in what you understand. This means to stay within your own circle of competence. As Buffett puts it "Everybody's got a different circle of competence. The important thing is not how big the circle is. The important thing is staying inside the circle." As simple as it sounds, it is the most difficult principle to follow. And wandering away from it can cause investors the biggest harm.

A case in point for this is that of the emerging market guru, Mark Mobius. While Mobius has enjoyed tremendous success with his investment techniques in Asia, his emerging market fund has not done so well outside of the region. In fact, the geographically diverse Emerging Market Fund has ranked only 103 out of 236 funds over 10 years in total returns.

So does it mean that Mobius has changed his style of investing? No he has not. He still sticks to his principles of picking value buys. However, it may be possible that he has just stepped outside his circle of competence.

Do you stick to your own circle of competence while choosing your investments?


http://www.equitymaster.com/

QL Resources Bhd

• Riding uptrend in demand for food commodities
Initiate coverage on QL Resources (QL with a Buy recommendation and
target price of RM7.30) based on 20x CY11 P/E. QL’s products will benefit
directly from the rising global demand and price trend for food
commodities. The group is one of Asia’s largest surimi manufacturers and
a Malaysian market leader in livestock feed trading, fishmeal and egg
production.

• Sustainable earnings growth
We have forecast a 3-year forward forecast EPS CAGR of 17.3% (FY11-
13), that will be driven by strong demand for QL’s marine, livestock feed,
poultry products and palm oil, with rising population and disposable
income, as well as the group’s steady capacity expansion. Diversification
reduces earnings volatility by smoothening out cyclicality of its resourcebased activities.

• Assertive regionalisation drive 
QL’s expansion plan is both local and regional, with total group capex set
to increase by 60% in the next 2 years to RM200m annually. The group is
replicating its business model in the ASEAN region with new poultry farms
in Tay Ninh, Vietnam and Cianjur, Indonesia; a new marine plant being
constructed in Surabaya, Indonesia and further planting and palm oil mill
slated for its plantation in Tarakan, Kalimantan, Indonesia.

• Benefits from government incentives for agriculture
QL benefits from the government’s pro-agriculture stance via tax
incentives that translate to a lower tax rate (15% in FY10) and subsidised
diesel for its deep sea fishing operations. The group’s latest venture into
renewable energy is directly in accordance with the government’s
promotion of green technology as contained in the Budget 2011
announcement.

• Further upside to share price 
Despite what seems like expensive valuations, we are bullish on QL as we
firmly believe it deserves premium valuation to peers as well as market.
QL’s next 2 years earnings CAGR of 16.1% is impressive as compared to
Malaysian peers of 5.6%. Furthermore, over the last 10 years, QL’s
average 12-month forward earnings growth is impressive at 23%. At our
target price, PEG ratio is undemanding at only 0.9x based on 10-year
average growth rate.

http://www.ecmmoney.com/wp-content/uploads/downloads/2010/12/QLG_101214_Initiating-coverage.pdf

Pimco says 'untenable' policies will lead to eurozone break-up

Pimco says 'untenable' policies will lead to eurozone break-up
Pimco, the world's largest bond fund, has called on Greece, Ireland and Portugal to step outside the eurozone temporarily and restructure their debts unless the currency bloc agrees to a radical change of course.

Pimco said current policies are untenable in the absence of fiscal union and will lead to a break-up of the euro 

By Ambrose Evans-Pritchard 7:00PM GMT 20 Dec 2010

330 Comments

Andrew Bosomworth, head of Pimco's portfolio management in Europe, said current policies are untenable in the absence of fiscal union and will lead to a break-up of the euro.

"Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments," he told German newspaper Die Welt.

He said these countries could rejoin EMU "after an appropriate debt restructuring", adding that devaluation would let them export their way back to health.

Mr Bosomworth said EU leaders were too quick to congratulate themselves on saving the euro last week with a deal for a permanent bail-out fund from 2013.

"The euro crisis is not over by a long shot. Market tensions will continue into 2011. The mechanism comes far too late," he said.

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The bond fund argues that the EU strategy of forcing heavily indebted countries to undergo draconian fiscal austerity without offsetting stimulus is unworkable.

The austerity policies are stifling the growth needed to stabilise debt levels.

"Can countries inside a fixed exchange-rate system like the euro grow and tighten budget policy at the same time? I don't think so. It didn't work in Argentina," Mr Bosomworth said.

Pimco also gave warning that the bond vigilantes have lost faith in the policy and are trying to liquidate their holdings of peripheral EMU faster than the European Central Bank (ECB) can buy the debt, causing a relentless rise in yields, and a vicious circle.

Despite this, the ECB said on Monday that it had cut purchases of government debt last week, settling €603m (£509m), down from €2.68bn a week earlier. The withering comments from the world's top investor in EMU sovereign debt is a blow for Portugal and Spain. Both nations are hoping bond spreads will start to narrow before they face a funding crunch in the first quarter of next year.

Jacques Cailloux, chief Europe economist at RBS, agreed that last week's European summit had failed to grasp the nettle.

"None of the policy responses put in place in Europe since the start of the crisis provides a credible backstop to prevent further contagion," Mr Cailloux said.

"We remain most concerned about an escalation of the sovereign debt crisis hitting larger economies in the euro area. Markets continue to underestimate the potential disruption via financial transmission channels that such an event could trigger."

Meanwhile, Spain must cut harder and deeper to rein in its finances, the OECD has warned, calling for an overhaul of its labour laws and employment practices. Madrid is already in the midst of harsh austerity measures, but the influential Paris-based think-tank said more must be done. The Spanish economy should be able to shrink its budget deficit from 11pc of GDP last year to the 6pc target next year, the OECD believes.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8215358/Pimco-says-untenable-policies-will-lead-to-eurozone-break-up.html

Price of hot chocolate to soar

Price of hot chocolate to soar
Just when it seemed the only respite from the bad weather was curling up in front of the fire with a mug of hot chocolate, there is more bad news.

Photo: Philip Hollis

6:55AM GMT 21 Dec 2010

25 Comments

The price of hot chocolate is to soar after the wholesale cost of cocoa powder jumped by 32 per cent over the last year.

The rise has been blamed on failing crops earlier in the year and disruption from suppliers in Ivory Coast, whose traders suffered following a chaotic general election earlier. Specualtors have been adding to the problem by stocking up.

Cocoa powder as risen to £3,000 a ton a much bigger rise than cocoa butter which is used to make chocolate bars.

The figures were disclosed by commodities analyst Mintec for The Grocer magazine.

'The price of chocolate drinks is coming under pressure and cocoa powder and sugar become more expensive on the world markets," a spokesman for Mintec.

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'Over the past few months the price of cocoa powder has been steadily increasing and sugar prices have followed suit propelling the price of chocolate raw materials to record levels.'

It added: 'As chocolate consumption is increasing faster than production, prices for raw materials might not ease quickly.'

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8215194/Price-of-hot-chocolate-to-soar.html