KPJ targets RM2b turnover by 2012
Written by Bernama
Monday, 23 November 2009 23:23
BUKIT MERTAJAM: Malaysia's largest private hospital group KPJ HEALTHCARE BHD [] aims to achieve an annual turnover of RM2 billion by 2012.
Chairman Tan Sri Muhammad Ali Hashim said the group was confident of achieving the target through its existing specialist hospital network and the services provided by several support companies in the group as well as the opening of new hospitals, takeover of other private hospitals and acquisition of sophisticated equipment.
KPJ Healthcare runs 19 hospitals nationwide, including the one officiated by Penang Yang di-Pertua Negeri Tun Abdul Rahman Abbas in Bandar Perda here today.
It also has three hospitals overseas, namely in Indonesia, Bangladesh and Saudi Arabia.
Speaking to reporters before the opening ceremony, Ali said: "In 2007, KPJ Healthcare recorded a revenue of RM1.1 billion and now, it has reached RM1.4 billion. According to the plan, we are sure the RM2 billion target by 2012 can be achieved."
Penang's position as a medical tourism destination would also allow the hospital to provide services to foreigners who came to the state for medical purposes, he said.
"We have invested about RM80 million for phase one of the new hospital, including the latest medical equipment like magnetic resonance imaging, computer tomography scanner and catheterisation laboratory, and we plan to develop phase two in stages later," Ali said.
He said that under phase one, the hospital, which began operations in August with 100 beds, would have the number of beds increased to 236 based on need.
He said that before this, KPJ Healthcare had taken over a specialist hospital in Bukit Mertajam and following the opening of KPJ Penang, the old hospital building would be turned into a nursing college. — Bernama
http://www.theedgemalaysia.com/business-news/154289-kpj-targets-rm2b-turnover-by-2012.html
Tuesday, 24 November 2009
Boustead 3Q net profit down 48% y-o-y
Boustead 3Q net profit down 48% y-o-y
Written by Chong Jin Hun
Monday, 23 November 2009 15:57
KUALA LUMPUR: BOUSTEAD HOLDINGS BHD []'s third quarter (3Q) net profit fell 47.5% year-on-year, dragged down by lower income from its PLANTATION [], heavy industries, real estate and hotel operations.
In a statement to the exchange today, Boustead said net profit declined to RM86.16 million in 3Q ended September from RM164 million, while revenue dropped 27.2% to RM1.42 billion from RM1.95 billion.
Cumulative nine-month net profit dipped 58.6% to RM193.92 million from RM468.2 million while revenue was down 32.6% to RM3.91 billion from RM5.8 billion.
"We are cautiously optimistic that the steady price range of RM2,200 to RM2,400 for crude palm oil (CPO) could sustain until the end of the year on the back of steady overseas demand as world economies recover. A factor that bodes well for the CPO price would be the potential further weakness of the US dollar," Boustead said.
On its heavy industries unit, the company said it would continue developing its defence and commercial businesses, and pursue strategic partnerships with foreign parties to promote the TECHNOLOGY [] transfer.
Meanwhile, Boustead's property division's earnings are expected to be driven by current developments at its Mutiara Damansara and Mutiara Rini townships, besides the company's commercial and retail PROPERTIES [].
The expansion of its hotel operations which now include the five-star Royale Chulan Hotel and Royale Bintang Seremban are anticipated to further boost revenue for the conglomerate's hospitality arm.
Boustead intends to reward its shareholders with a third interim dividend of 7.5 sen per share less 25% income tax.
http://www.theedgemalaysia.com/business-news/154259-boustead-3q-net-profit-down-48-y-o-y.html
Boustead’s 3Q profit down 47% y-o-y
Tags: Affin Group | Boustead | Lodin Wok Kamaruddin
Written by Isabelle Francis
Tuesday, 24 November 2009 10:28
KUALA LUMPUR: BOUSTEAD HOLDINGS BHD [] posted a net profit of RM86.2 million in the third quarter (3Q) ended Sept 30, 2009, down 47% from RM164 million a year earlier but up 84% from the preceding quarter’s earnings of RM63 million.
Revenue dropped 27% year-on-year (y-o-y) to RM1.42 billion from RM1.95 billion but was up 11% from the preceding quarter. Basic earnings per share (EPS) fell to 12.41 sen from 25.48 sen a year earlier.
It declared a third interim dividend of 7.5 sen per share less tax, bringing the total to 17.5 sen or 35% per share less tax for the current financial year ending Dec 31, 2009. The latest dividend is payable on Dec 29, 2009.
For the nine-month period, net profit fell 59% to RM193.92 million from RM468.2 million a year earlier, while revenue dipped 33% to RM3.91 billion from RM5.8 billion.
EPS fell to 16.55 sen from 48.36 sen, partly due to the dilutive effect of a rights issue.
“Clearly the tide and sentiments are turning by virtue of the fact that our earnings are up (quarter-on-quarter). The sectors of the economy we are involved in, namely the consumer and the heavy industries segments bode well for the group while our PLANTATION []s continue to be a steady revenue generator and profit contributor.
“Our balance sheet looks strong given our recent rights issue which generated proceeds in excess of RM700 million. Our paid-up capital has increased to RM456 million and our gearing ratio has dropped significantly to 0.8 from 1.2 times. In essence, our financial strength is strong while our prospects look better,” said group managing director Tan Sri Lodin Wok Kamaruddin in a statement yesterday.
Boustead told Bursa Malaysia yesterday its highest profit earner — the heavy industries division — contributed a pre-tax profit of RM113 million for the nine-month period versus RM233.1 million a year earlier due to slower progress of work and cost escalation.
Its second-largest profit contributor, the plantation division, contributed a pre-tax profit of RM50.7 million versus RM260.8 million.
Boustead said the division achieved an average palm oil price of RM2,172 per tonne versus RM3,103 per tonne previously. Fresh fruit bunch harvest totalling 827,850 tonnes was 5% lower than last year.
It said its property division’s pre-tax profit of RM58.9 million for the period was 44% lower than last year’s. Profit from its hotel operation was lower due to the start-up cost of the recently opened Royale Chulan Hotel. It added that the property development segment profit was also lower, due to the absence of corporate lot sales.
Boustead said its finance and investment division reported an improved pre-tax profit of RM29.6 million.
It noted that BH Insurance posted a 62% higher pre-tax profit of RM24.5 million, mainly due to the increase in underwriting and investment income.
Meanwhile, it said the Affin Group posted a better pre-tax profit of RM383.2 million versus RM288.6 million a year earlier, due to improved net interest and Islamic banking income, while loan provisions were also lower.
Boustead said the trading division, meanwhile, posted a lower profit of RM21.5 million. The division gained profits from its petroleum retail unit Boustead Petroleum Marketing Sdn Bhd (BHPetrol), and from the LCCT Baggage Handling system project.
On its outlook,
This article appeared in The Edge Financial Daily, November 24, 2009.
Written by Chong Jin Hun
Monday, 23 November 2009 15:57
KUALA LUMPUR: BOUSTEAD HOLDINGS BHD []'s third quarter (3Q) net profit fell 47.5% year-on-year, dragged down by lower income from its PLANTATION [], heavy industries, real estate and hotel operations.
In a statement to the exchange today, Boustead said net profit declined to RM86.16 million in 3Q ended September from RM164 million, while revenue dropped 27.2% to RM1.42 billion from RM1.95 billion.
Cumulative nine-month net profit dipped 58.6% to RM193.92 million from RM468.2 million while revenue was down 32.6% to RM3.91 billion from RM5.8 billion.
"We are cautiously optimistic that the steady price range of RM2,200 to RM2,400 for crude palm oil (CPO) could sustain until the end of the year on the back of steady overseas demand as world economies recover. A factor that bodes well for the CPO price would be the potential further weakness of the US dollar," Boustead said.
On its heavy industries unit, the company said it would continue developing its defence and commercial businesses, and pursue strategic partnerships with foreign parties to promote the TECHNOLOGY [] transfer.
Meanwhile, Boustead's property division's earnings are expected to be driven by current developments at its Mutiara Damansara and Mutiara Rini townships, besides the company's commercial and retail PROPERTIES [].
The expansion of its hotel operations which now include the five-star Royale Chulan Hotel and Royale Bintang Seremban are anticipated to further boost revenue for the conglomerate's hospitality arm.
Boustead intends to reward its shareholders with a third interim dividend of 7.5 sen per share less 25% income tax.
http://www.theedgemalaysia.com/business-news/154259-boustead-3q-net-profit-down-48-y-o-y.html
Boustead’s 3Q profit down 47% y-o-y
Tags: Affin Group | Boustead | Lodin Wok Kamaruddin
Written by Isabelle Francis
Tuesday, 24 November 2009 10:28
KUALA LUMPUR: BOUSTEAD HOLDINGS BHD [] posted a net profit of RM86.2 million in the third quarter (3Q) ended Sept 30, 2009, down 47% from RM164 million a year earlier but up 84% from the preceding quarter’s earnings of RM63 million.
Revenue dropped 27% year-on-year (y-o-y) to RM1.42 billion from RM1.95 billion but was up 11% from the preceding quarter. Basic earnings per share (EPS) fell to 12.41 sen from 25.48 sen a year earlier.
It declared a third interim dividend of 7.5 sen per share less tax, bringing the total to 17.5 sen or 35% per share less tax for the current financial year ending Dec 31, 2009. The latest dividend is payable on Dec 29, 2009.
For the nine-month period, net profit fell 59% to RM193.92 million from RM468.2 million a year earlier, while revenue dipped 33% to RM3.91 billion from RM5.8 billion.
EPS fell to 16.55 sen from 48.36 sen, partly due to the dilutive effect of a rights issue.
“Clearly the tide and sentiments are turning by virtue of the fact that our earnings are up (quarter-on-quarter). The sectors of the economy we are involved in, namely the consumer and the heavy industries segments bode well for the group while our PLANTATION []s continue to be a steady revenue generator and profit contributor.
“Our balance sheet looks strong given our recent rights issue which generated proceeds in excess of RM700 million. Our paid-up capital has increased to RM456 million and our gearing ratio has dropped significantly to 0.8 from 1.2 times. In essence, our financial strength is strong while our prospects look better,” said group managing director Tan Sri Lodin Wok Kamaruddin in a statement yesterday.
Boustead told Bursa Malaysia yesterday its highest profit earner — the heavy industries division — contributed a pre-tax profit of RM113 million for the nine-month period versus RM233.1 million a year earlier due to slower progress of work and cost escalation.
Its second-largest profit contributor, the plantation division, contributed a pre-tax profit of RM50.7 million versus RM260.8 million.
Boustead said the division achieved an average palm oil price of RM2,172 per tonne versus RM3,103 per tonne previously. Fresh fruit bunch harvest totalling 827,850 tonnes was 5% lower than last year.
It said its property division’s pre-tax profit of RM58.9 million for the period was 44% lower than last year’s. Profit from its hotel operation was lower due to the start-up cost of the recently opened Royale Chulan Hotel. It added that the property development segment profit was also lower, due to the absence of corporate lot sales.
Boustead said its finance and investment division reported an improved pre-tax profit of RM29.6 million.
It noted that BH Insurance posted a 62% higher pre-tax profit of RM24.5 million, mainly due to the increase in underwriting and investment income.
Meanwhile, it said the Affin Group posted a better pre-tax profit of RM383.2 million versus RM288.6 million a year earlier, due to improved net interest and Islamic banking income, while loan provisions were also lower.
Boustead said the trading division, meanwhile, posted a lower profit of RM21.5 million. The division gained profits from its petroleum retail unit Boustead Petroleum Marketing Sdn Bhd (BHPetrol), and from the LCCT Baggage Handling system project.
On its outlook,
- Boustead said its most lucrative business, the heavy industries division, will continue with its effort in developing its defence and commercial businesses. It will also establish more partnerships.
- The company is cautiously optimistic that CPO prices could sustain at the RM2,200 to RM2,400 level till year-end on the back of steady overseas demand as economies around the world recover.
- It said a factor that bodes well for the CPO price would be the potential for further weaknesses in the US dollar.
- It added that the property division’s earnings would be driven by the ongoing developments at Mutiara Damansara and Mutiara Rini townships and the division’s stable of commercial and retail PROPERTIES [].
- The company said that the expansion of the hotel activities, which now include the five-star Royale Chulan Hotel and Royale Bintang Seremban are expected to further increase revenue for the hotel division.
This article appeared in The Edge Financial Daily, November 24, 2009.
Hong Leong raises EPS forecast for UMW
Hong Leong raises EPS forecast for UMW
Written by Chong Jin Hun
Monday, 23 November 2009 14:55
KUALA LUMPUR: Hong Leong Investment Bank Bhd has raised its earnings per share forecast for UMW HOLDINGS BHD [] by up to 6% in financial years ending December 2009 and 2010. This is in anticipation that a recovering economic landscape will result in better car sales for the company.
The franchise holder of Toyota cars in Malaysia is also expected to register better financials against the backdrop of a weakening US dollar, besides lower advertising and promotion expenses.
"Higher consumer spending will lift auto earnings and UMW will see margin expansion from depreciating USD," Hong Leong analyst Jason Saw Koon Khim wrote in a note to clients today.
Saw has also upgraded his recommendation for UMW shares from Sell to Hold with a new target price of RM6.90 based on a higher price to earnings ratio (PER) of 15 times FY10 earnings.
The stock currently trades at a PER of 14 times FY10 earnings compared to FBM KLCI's 15 times, and pure auto stocks's seven times to 12 times.
The valuation premium of UMW compared to pure auto stocks is deemed justified by virtue of UMW's status as a big-cap entity, and the company's diversified operations.
"We think (UMW's) share price has fully priced in the earnings recovery as the stock’s PER valuation has expanded from 11 times to 14 times FY10 earnings."
http://www.theedgemalaysia.com/business-news/154252-hong-leong-raises-eps-forecast-for-umw.html
Written by Chong Jin Hun
Monday, 23 November 2009 14:55
KUALA LUMPUR: Hong Leong Investment Bank Bhd has raised its earnings per share forecast for UMW HOLDINGS BHD [] by up to 6% in financial years ending December 2009 and 2010. This is in anticipation that a recovering economic landscape will result in better car sales for the company.
The franchise holder of Toyota cars in Malaysia is also expected to register better financials against the backdrop of a weakening US dollar, besides lower advertising and promotion expenses.
"Higher consumer spending will lift auto earnings and UMW will see margin expansion from depreciating USD," Hong Leong analyst Jason Saw Koon Khim wrote in a note to clients today.
Saw has also upgraded his recommendation for UMW shares from Sell to Hold with a new target price of RM6.90 based on a higher price to earnings ratio (PER) of 15 times FY10 earnings.
The stock currently trades at a PER of 14 times FY10 earnings compared to FBM KLCI's 15 times, and pure auto stocks's seven times to 12 times.
The valuation premium of UMW compared to pure auto stocks is deemed justified by virtue of UMW's status as a big-cap entity, and the company's diversified operations.
"We think (UMW's) share price has fully priced in the earnings recovery as the stock’s PER valuation has expanded from 11 times to 14 times FY10 earnings."
http://www.theedgemalaysia.com/business-news/154252-hong-leong-raises-eps-forecast-for-umw.html
BAT’s dividends in jeopardy
BAT’s dividends in jeopardy
Tags: BAT
Written by The Edge Financial Daily
Monday, 23 November 2009 11:12
BRITISH AMERICAN TOBACCO (M) [] Bhd (Nov 20, RM44.76)
Maintain hold at RM45.08, target price RM42.50: BAT’s nine-month (9MFY09) net profit of RM573.9 million came in just within our expectations and consensus, constituting 70% of both our FY09 net profit forecast and street estimates. A second interim dividend per share (DPS) of 61 sen tax-exempt was below our expectation.
Double-digit volume contraction continues as illicit trade reaches all-time high of 38.7%. BAT’s 9MFY09 sales volumes contracted by 17.3% year-on-year (y-o-y), steeper than total industry volume (TIV) shrinkage of 14.6% and is the third consecutive quarter that BAT’s volume has decreased more than the TIV’s.
This was due to the acceleration in consumers’ downtrading in response to tough economic conditions and timing of pre-budget trade loading by retailers and distributors.
Lower sales volumes, particularly in the value segment, caused revenue to decrease by 7% y-o-y. Pall Mall’s retail audit market share slid to 7.8% (-0.6% y-o-y) as consumers bypassed value and extremely low-priced cigarettes (ELPC) for illegal cigarettes. BAT premium brands Dunhill and Kent however both grew market share in 9MFY09 by 1.7%.
The timing of marketing expense and higher finance cost saw 3QFY09 pre-tax profit decrease by 13% q-o-q, steeper than the 6% dip in revenue. Higher advertising and promotion expense for the launch of new compact cigarette product Kent Nanotek, consolidation of distribution network and higher finance cost (for the borrowings overlap as RM150 million medium term notes matured on Nov 2, 2009) caused the decline in pre-tax profit.
3QFY09 net profit slid further by 17% q-o-q, due to a 3% increase in tax rate due to the non-deductibility of interest expense from BAT’s move to single-tier tax system and a one-off adjustment for shortfall in dividend franking credits due to tax refunds.
Dividends are at risk, with the second interim DPS of 61 sen being 20% lower than 3QFY08’s 76 sen. While BAT will continue to pay out at least 90% of net profit in dividends, the practice of increasing absolute DPS y-o-y is under review. We have lowered FY09 net DPS estimate to RM2.53 (compared to FY08’s RM2.65). That translates to FY09 dividend yield of 6%.
We have revised FY09 and FY10 net profit forecast downwards by 2% and 3% respectively. We have raised our FY09 BAT volume contraction assumption to -10% (from -5%).
We maintain a hold recommendation with lower target price of RM42.50 predicated on a discounted cash flow (DCF) valuation with the weighted average cost of capital (WACC) at 6.3% and terminal growth rate of 2% from RM45 previously. — Kenanga Research, Nov 20
This article appeared in The Edge Financial Daily, November 23, 2009
Tags: BAT
Written by The Edge Financial Daily
Monday, 23 November 2009 11:12
BRITISH AMERICAN TOBACCO (M) [] Bhd (Nov 20, RM44.76)
Maintain hold at RM45.08, target price RM42.50: BAT’s nine-month (9MFY09) net profit of RM573.9 million came in just within our expectations and consensus, constituting 70% of both our FY09 net profit forecast and street estimates. A second interim dividend per share (DPS) of 61 sen tax-exempt was below our expectation.
Double-digit volume contraction continues as illicit trade reaches all-time high of 38.7%. BAT’s 9MFY09 sales volumes contracted by 17.3% year-on-year (y-o-y), steeper than total industry volume (TIV) shrinkage of 14.6% and is the third consecutive quarter that BAT’s volume has decreased more than the TIV’s.
This was due to the acceleration in consumers’ downtrading in response to tough economic conditions and timing of pre-budget trade loading by retailers and distributors.
Lower sales volumes, particularly in the value segment, caused revenue to decrease by 7% y-o-y. Pall Mall’s retail audit market share slid to 7.8% (-0.6% y-o-y) as consumers bypassed value and extremely low-priced cigarettes (ELPC) for illegal cigarettes. BAT premium brands Dunhill and Kent however both grew market share in 9MFY09 by 1.7%.
The timing of marketing expense and higher finance cost saw 3QFY09 pre-tax profit decrease by 13% q-o-q, steeper than the 6% dip in revenue. Higher advertising and promotion expense for the launch of new compact cigarette product Kent Nanotek, consolidation of distribution network and higher finance cost (for the borrowings overlap as RM150 million medium term notes matured on Nov 2, 2009) caused the decline in pre-tax profit.
3QFY09 net profit slid further by 17% q-o-q, due to a 3% increase in tax rate due to the non-deductibility of interest expense from BAT’s move to single-tier tax system and a one-off adjustment for shortfall in dividend franking credits due to tax refunds.
Dividends are at risk, with the second interim DPS of 61 sen being 20% lower than 3QFY08’s 76 sen. While BAT will continue to pay out at least 90% of net profit in dividends, the practice of increasing absolute DPS y-o-y is under review. We have lowered FY09 net DPS estimate to RM2.53 (compared to FY08’s RM2.65). That translates to FY09 dividend yield of 6%.
We have revised FY09 and FY10 net profit forecast downwards by 2% and 3% respectively. We have raised our FY09 BAT volume contraction assumption to -10% (from -5%).
We maintain a hold recommendation with lower target price of RM42.50 predicated on a discounted cash flow (DCF) valuation with the weighted average cost of capital (WACC) at 6.3% and terminal growth rate of 2% from RM45 previously. — Kenanga Research, Nov 20
This article appeared in The Edge Financial Daily, November 23, 2009
Hai-O hits five-week low
Hai-O hits five-week low
Tags: Hai-O
Written by Joseph Chin
Friday, 20 November 2009 15:44
KUALA LUMPUR: Shares of Hai-O Enterprise extended their losses in late afternoon trade on Friday, Nov 20, falling to a five-week low of RM6.93.
At 3.23pm, the shares were down 27 sen to RM6.93, the lowest since Oct 15.
On Thursday, the shares fell 46 sen, the biggest one-day loss in recent weeks, as investors started taking profit after the run-up in the share price.
Hai-O is a manufacturer and wholesaler of traditional herbal and pharmaceutical products.
In late October, a local research house increased the indicative fair value for Hai-O to RM8.80 from RM6.80, based on higher price-to-earnings ratio (PER) of nine times CY2010 earnings per share (versus eight times CY2010 earnings per share previously).
This is a 38% discount to the research house's target PER for the consumer sector of 14.5 times due to its smaller market capitalisation as well as low liquidity.
The higher PER target, the research house said, was to reflect increased investor participation in mid-cap stocks,a lower risk premium and improved market sentiment.
http://www.theedgemalaysia.com/business-news/154142-hai-o-hits-5-week-low.html
Tags: Hai-O
Written by Joseph Chin
Friday, 20 November 2009 15:44
KUALA LUMPUR: Shares of Hai-O Enterprise extended their losses in late afternoon trade on Friday, Nov 20, falling to a five-week low of RM6.93.
At 3.23pm, the shares were down 27 sen to RM6.93, the lowest since Oct 15.
On Thursday, the shares fell 46 sen, the biggest one-day loss in recent weeks, as investors started taking profit after the run-up in the share price.
Hai-O is a manufacturer and wholesaler of traditional herbal and pharmaceutical products.
In late October, a local research house increased the indicative fair value for Hai-O to RM8.80 from RM6.80, based on higher price-to-earnings ratio (PER) of nine times CY2010 earnings per share (versus eight times CY2010 earnings per share previously).
This is a 38% discount to the research house's target PER for the consumer sector of 14.5 times due to its smaller market capitalisation as well as low liquidity.
The higher PER target, the research house said, was to reflect increased investor participation in mid-cap stocks,a lower risk premium and improved market sentiment.
http://www.theedgemalaysia.com/business-news/154142-hai-o-hits-5-week-low.html
Coastal Contracts profit doubles
Coastal Contracts profit doubles
Tags: Coastal Contracts
Written by Joy Lee
Tuesday, 24 November 2009 10:33
KUALA LUMPUR: COASTAL CONTRACTS BHD []’s net profit more than doubled for the third quarter ended Sept 30, 2009 on the back of a strong performance from its shipbuilding and ship repairs division.
Its net profit surged to RM47.95 million from RM22.52 million a year earlier while revenue jumped 113% to RM140.08 million from RM65.93 million previously. Subsequently, earnings per share rose to 13.31 sen from 6.39 sen. No dividend was declared for the quarter under review.
The shipbuilding and ship repairs division booked a higher revenue of RM132.8 million in the current quarter compared with RM60.4 million in the corresponding quarter a year earlier, an increase of 120%, due to more vessel deliveries in the current quarter. Its vessel chartering division recorded a 33% rise in revenue to RM7.3 million from RM5.5 million a year earlier.
“The improved performance was attributed to a combination of greater tonnage transported and higher fleet utilisation,” it said.
Year-to-date, the group said its net profit of RM108.69 million, which rose 66.3% year-on-year, has already surpassed 2008’s full-year profits of RM96.8 million. Its revenue for the cumulative nine months increased 33.5% to RM315.18 million from RM236.15 million previously.
The group said the steady resurgence of crude oil prices had caused previously shelved exploration and production projects to return on the back of revival in capital expenditures by oil companies.
The International Energy Agency has recently revised up its forecast for oil demand for 2010. As at 8.20pm yesterday, crude oil added 91 cents or 1.2% to US$78.38 (RM264.92) per barrel.
“In the light of these positive developments, the near-term outlook for demand of offshore support vessels (OSVs) is expected to improve, although a full-blown recovery may still be far from the horizon. In any event, Coastal group’s revenue and earnings will continue to benefit from the strength of its vessel sales order book, providing visibility for close to two years ahead. Coupled with a healthy balance sheet with low level of borrowings, Coastal group will continue to operate from a position of strength,” it said.
Moving forward, it said the group had increased optimism of securing new contracts to add to its vessel sales order book, especially in the OSVs category, as well as reaping recurrent returns from its chartering division through optimal deployment of the group’s fleet in energy transportation and in various oil and gas support services.
This article appeared in The Edge Financial Daily, November 24, 2009.
Tags: Coastal Contracts
Written by Joy Lee
Tuesday, 24 November 2009 10:33
KUALA LUMPUR: COASTAL CONTRACTS BHD []’s net profit more than doubled for the third quarter ended Sept 30, 2009 on the back of a strong performance from its shipbuilding and ship repairs division.
Its net profit surged to RM47.95 million from RM22.52 million a year earlier while revenue jumped 113% to RM140.08 million from RM65.93 million previously. Subsequently, earnings per share rose to 13.31 sen from 6.39 sen. No dividend was declared for the quarter under review.
The shipbuilding and ship repairs division booked a higher revenue of RM132.8 million in the current quarter compared with RM60.4 million in the corresponding quarter a year earlier, an increase of 120%, due to more vessel deliveries in the current quarter. Its vessel chartering division recorded a 33% rise in revenue to RM7.3 million from RM5.5 million a year earlier.
“The improved performance was attributed to a combination of greater tonnage transported and higher fleet utilisation,” it said.
Year-to-date, the group said its net profit of RM108.69 million, which rose 66.3% year-on-year, has already surpassed 2008’s full-year profits of RM96.8 million. Its revenue for the cumulative nine months increased 33.5% to RM315.18 million from RM236.15 million previously.
The group said the steady resurgence of crude oil prices had caused previously shelved exploration and production projects to return on the back of revival in capital expenditures by oil companies.
The International Energy Agency has recently revised up its forecast for oil demand for 2010. As at 8.20pm yesterday, crude oil added 91 cents or 1.2% to US$78.38 (RM264.92) per barrel.
“In the light of these positive developments, the near-term outlook for demand of offshore support vessels (OSVs) is expected to improve, although a full-blown recovery may still be far from the horizon. In any event, Coastal group’s revenue and earnings will continue to benefit from the strength of its vessel sales order book, providing visibility for close to two years ahead. Coupled with a healthy balance sheet with low level of borrowings, Coastal group will continue to operate from a position of strength,” it said.
Moving forward, it said the group had increased optimism of securing new contracts to add to its vessel sales order book, especially in the OSVs category, as well as reaping recurrent returns from its chartering division through optimal deployment of the group’s fleet in energy transportation and in various oil and gas support services.
This article appeared in The Edge Financial Daily, November 24, 2009.
Monday, 23 November 2009
Every mistake is an opportunity to learn
Error is defined as an unintentional deviation from a goal, caused by an act or omission that is in principle avoidable.
Errors happen when we make decisions.
Errors happen when we make decisions.
- By improving the way we make decisions, we can try to prevent errors, or minimise their probability.
- By improving the way we respond when things go wrong, we can try to manage errors, or minimise their impact.
- We can also try to create positive impacts in negative situations, by taking the opportunities for learning that mistakes provide.
Warren Buffett's Midas touch
The decisions that have made Buffett the second wealthiest man in the world have included investments in Coca-Cola, American Express, Gillette, The Washington Post and Wells Fargo, plus some major acquisitions in the fields of insurance, house building and building materials, clothing and furniture. During 2003 Buffett, contrary to some market expectations, engaged in currency speculation against the dollar. By the end of the year his company held some $12 billion in foreign currency.
Buffett's success is founded on information. When, during the 1990s, undervalued stocks were becoming more difficult to find, Buffett turned his attention to corporate acquisitions. His next field of operation, in 2002, was junk bonds - until prices rose. The subsequent foreign currency operation built on the US trade deficit when foreign investors were flooded with dollars.
Buffett takes a long-term view and typically shuns debt. During the dot-com boom he preferred to steer clear of high-tech stocks, his attitude appearing old-fashioned to many. In the event, his preference for more traditional and easily understood firms and products bore fruit. He had correctly gauged the low probability of dotcom stocks rising. He likes to ask 'discomforting questions' to avoid biased decision making.
Buffett also understands the need to avoid fatal downsides. He has said that he has 'never believed in risking what my family and friends have and need in order to pursue what they don't have and don't need'.
Buffett's success is founded on information. When, during the 1990s, undervalued stocks were becoming more difficult to find, Buffett turned his attention to corporate acquisitions. His next field of operation, in 2002, was junk bonds - until prices rose. The subsequent foreign currency operation built on the US trade deficit when foreign investors were flooded with dollars.
Buffett takes a long-term view and typically shuns debt. During the dot-com boom he preferred to steer clear of high-tech stocks, his attitude appearing old-fashioned to many. In the event, his preference for more traditional and easily understood firms and products bore fruit. He had correctly gauged the low probability of dotcom stocks rising. He likes to ask 'discomforting questions' to avoid biased decision making.
Buffett also understands the need to avoid fatal downsides. He has said that he has 'never believed in risking what my family and friends have and need in order to pursue what they don't have and don't need'.
Responding to risks: Summary
There are several possible responses to risk, ranging from tolerating to eliminating.
The right response to risk depends on the specific situation and also our calculations of probability and impact.
Transferring and insuring against risk involve others in risks, to the benefit of the business; the trade-off is increased costs.
Managing risks well depends on sharing information, clear responsibilities and consistency of approach.
The right response to risk depends on the specific situation and also our calculations of probability and impact.
Transferring and insuring against risk involve others in risks, to the benefit of the business; the trade-off is increased costs.
Managing risks well depends on sharing information, clear responsibilities and consistency of approach.
Sunday, 22 November 2009
Responding to risks: Insuring risks
Insuring risks is similar to transferring them, but rather than asking another company to tkae action if a risk occurs, you ask them to financially compensate you for its occurrence.
As with transferring, the company will want payment for taking on the risk in this way. This is familair concept from everyday life, where we have to insure our household goods, cars and mortgage repayments against a number of downside risks, from theft and accident to death.
Business also invest in many types of insurance, including public liability, employer's liability and so on.
Insurance is often a good response to operational risks. It is particualrly appropriate for low-probability downsides with hugely significant impacts, such as a fire at the workplace.
As with transferring, the company will want payment for taking on the risk in this way. This is familair concept from everyday life, where we have to insure our household goods, cars and mortgage repayments against a number of downside risks, from theft and accident to death.
Business also invest in many types of insurance, including public liability, employer's liability and so on.
Insurance is often a good response to operational risks. It is particualrly appropriate for low-probability downsides with hugely significant impacts, such as a fire at the workplace.
Responding to risks: Transferring risks
Transferring is the concept of placing risks with those outside the business who are best placed to manage them.
Typically, this means using another company to take on a business process that you do not wish to carry out in-house, or are unable to do yourself. There are benefits in terms of reducing the probability and impact of downsides and also in-house effort in managing the risk, but there will be a cost - people will want paying for taking on risks.
Risks can be transferred in different ways:
Tacit risk transfer is generally not beneficial - it often represents a situation where one party has wrongly assumed that the other one will take an action or respond to a situation. To prevent problems like this, you need share all information on the risk with the potential transferee: its nature, probability and likely impact (on both parties); what you will pay them to take it on, why you want to transfer it and so on.
Payment for taking on risks will be more realistic when there is frank and realistic discussion of probabilities, impacts and costs. Lack of communication may prompt the party taking on the risk to overcharge in order to cover themselves against the unexpected, or factors tha have not been clarified.
Typically, this means using another company to take on a business process that you do not wish to carry out in-house, or are unable to do yourself. There are benefits in terms of reducing the probability and impact of downsides and also in-house effort in managing the risk, but there will be a cost - people will want paying for taking on risks.
Risks can be transferred in different ways:
- formally: on a contractual basis (e.g. IT service agreement), or through some other written agreement
- informally: through discussions and meetings, on a basis of trust
- tacitly: through assumption, perhaps based on precedent or simply beliefs.
Tacit risk transfer is generally not beneficial - it often represents a situation where one party has wrongly assumed that the other one will take an action or respond to a situation. To prevent problems like this, you need share all information on the risk with the potential transferee: its nature, probability and likely impact (on both parties); what you will pay them to take it on, why you want to transfer it and so on.
Payment for taking on risks will be more realistic when there is frank and realistic discussion of probabilities, impacts and costs. Lack of communication may prompt the party taking on the risk to overcharge in order to cover themselves against the unexpected, or factors tha have not been clarified.
Responding to risks: Hedging risks
Hedging means taking additional risks that offset other risks, so that if the downside impact of one risk occurs, it is (in theory) balanced by the upside impact of the other risk.
An example would be betting an equal sum on both sides in a sporting fixture - whatever the outcome, you cannot lose. In investment or business, a 'perfect' hedge (one where the different outcomes are perfectly balanced) is practically impossible. A contractor can partially hedge his material cost prices of his contract with an advance order with the manufacturer for future delivery.
Hedging isn'tjust an approach to business or investment risk. We engage in many trivial hedging behaviours all the time in our everyday lives - in any situation where we wish to avoid the risk of commitment. When we hedge in everyday life, we set up alternatives for ourselves that will minimise the negative impact on us if things don't work out. Consider the planning of a Friday night out. We might make tentative plans to go out with one group of friends, but remain open to other offers. After all, a better offer might come along - with a higher probability of positive impact (more enjoyment). We are 'hedging our bets'.
An example would be betting an equal sum on both sides in a sporting fixture - whatever the outcome, you cannot lose. In investment or business, a 'perfect' hedge (one where the different outcomes are perfectly balanced) is practically impossible. A contractor can partially hedge his material cost prices of his contract with an advance order with the manufacturer for future delivery.
Hedging isn'tjust an approach to business or investment risk. We engage in many trivial hedging behaviours all the time in our everyday lives - in any situation where we wish to avoid the risk of commitment. When we hedge in everyday life, we set up alternatives for ourselves that will minimise the negative impact on us if things don't work out. Consider the planning of a Friday night out. We might make tentative plans to go out with one group of friends, but remain open to other offers. After all, a better offer might come along - with a higher probability of positive impact (more enjoyment). We are 'hedging our bets'.
Responding to risks: Concentrating risks
Concentrating risks is the opposite of diversifying - it means deliberately 'putting all your eggs in one basket'. The effect is opposite too: it increases the severity of potential impacts, but reduces management overheads, variables, unknown factors and dependencies.
An example of concentrating risk would be assigning a single person to a project full time, rather than assigning a small team part time.
The time and cost of running the project might well be reduced, and the project might well be reduced, and the project may be run in a more coherent way, but there is a risk that the key individual will move on, damaging the chances of delivery.
The equivalent in financial terms is investing heavily in one or two stocks or products that you believe are sound, rather than spreading risk around because you are less sure of your market knowledge.
Concentrating risk depends for its success on the skill and knowledge of decision makers. With fewer chances to correct mistakes, people need to get it right first time.
An example of concentrating risk would be assigning a single person to a project full time, rather than assigning a small team part time.
The time and cost of running the project might well be reduced, and the project might well be reduced, and the project may be run in a more coherent way, but there is a risk that the key individual will move on, damaging the chances of delivery.
The equivalent in financial terms is investing heavily in one or two stocks or products that you believe are sound, rather than spreading risk around because you are less sure of your market knowledge.
Concentrating risk depends for its success on the skill and knowledge of decision makers. With fewer chances to correct mistakes, people need to get it right first time.
Responding to risks: Diversifying risks
Diversifying is about 'spreading risk around' - reducing your potential exposure by not having all eggs in one basket. It reduces potential negative impact, but this normally results in extra costs.
Diversification can be a good tactic where there are problems in keeping the risk 'in one place', perhaps because there is a big potential downside. For example, printers are dependent on paper suppliers to keep their operations running. By setting up many suppliers for this commodity, they make it more likely that they will be able to get cover from another supplier if one can't delviver, thus reducing the potential downside risk of running out of paper. (They also reap a number of side benefits, such as the opportunity to benchmark the prices of different suppliers, gain information about suppliers, find out about different ways of handling their orders and transactions and so on.)
However, there's always a downside. There will be more administrative work in handling a large number of suppliers, and more management decisions to be made about which one will be used in each case; is price the only factor, or is the commercial relationship important too?
Diversification is also a good strategy for managing financial risk. Investment vehicles that give investors the chance to invest in a range of companies offer those with little stock market knowledge a way to invest with reduced risk of exposure to market volatility in comparison with direct investment in a singloe company.
The key to diversification is keeping the different risks as separate from each other as possible, or reducing interdependencies between them. No amount of diversification will protect against a worldwide recession, but investing in different economies around the world will offset the risk of a downturn in any particular one of them.
In a project contex, diversification can improve the chances of success. Suppose a project has a 0.8 (80%) probability of failure. It follows that the probability of success is 0.2 920%) - not particularly good. Perhaps it is a speculative research and development project aimed at creating a new product.
But what if we ran two such projects? The probability of both failing is 0.8 x 0.8 = 0.64 (64%) . And if we ran three, the probability of ALL THREE failing would be 0.8 x 0.8 x0.8 = 0.512 (51.2%), making the probability of having at LEAST ONE success nearly 50% (0.488 or 48.8%). As we add more and more projects, the chances of success in at least one case steadily increases. With 20 projects, our chances of having one success are 0.99 (99%) - we would be almost certain to succeed in one of the 20 projects.
Diversifying risk through multiple projects:
Probabiltiy of total failure ----- Probability of single success
Run a single project
80% (0.8) ---- 20% (0.2)
Run two projects
64% (0.8x0.8) ---- 36% (0.36)
Run three projects
51.2% (0.8x0.8x0.8) ---- 48.8% (0.488)
Run 20 projects
1% (0.8^20) ---- 99% (0.99)
This illustrates how diversification can improve the chances of success, although at a price. Running 20 projects will be much more expensive than running one. But it may be that 20 modest projects, each researching a different potential product, are a better way forward than a single 'all or nothing' project puttting lots of resource into a single product.
An important point to remember is that the 'winners' must pay for the 'losers' if you choose to go for diversification. The business must be able to afford to take all these risks, with all their respective potential downsides, and be confident that there is no risk of bankruptcy as a result.
Diversification can be a good tactic where there are problems in keeping the risk 'in one place', perhaps because there is a big potential downside. For example, printers are dependent on paper suppliers to keep their operations running. By setting up many suppliers for this commodity, they make it more likely that they will be able to get cover from another supplier if one can't delviver, thus reducing the potential downside risk of running out of paper. (They also reap a number of side benefits, such as the opportunity to benchmark the prices of different suppliers, gain information about suppliers, find out about different ways of handling their orders and transactions and so on.)
However, there's always a downside. There will be more administrative work in handling a large number of suppliers, and more management decisions to be made about which one will be used in each case; is price the only factor, or is the commercial relationship important too?
Diversification is also a good strategy for managing financial risk. Investment vehicles that give investors the chance to invest in a range of companies offer those with little stock market knowledge a way to invest with reduced risk of exposure to market volatility in comparison with direct investment in a singloe company.
The key to diversification is keeping the different risks as separate from each other as possible, or reducing interdependencies between them. No amount of diversification will protect against a worldwide recession, but investing in different economies around the world will offset the risk of a downturn in any particular one of them.
In a project contex, diversification can improve the chances of success. Suppose a project has a 0.8 (80%) probability of failure. It follows that the probability of success is 0.2 920%) - not particularly good. Perhaps it is a speculative research and development project aimed at creating a new product.
But what if we ran two such projects? The probability of both failing is 0.8 x 0.8 = 0.64 (64%) . And if we ran three, the probability of ALL THREE failing would be 0.8 x 0.8 x0.8 = 0.512 (51.2%), making the probability of having at LEAST ONE success nearly 50% (0.488 or 48.8%). As we add more and more projects, the chances of success in at least one case steadily increases. With 20 projects, our chances of having one success are 0.99 (99%) - we would be almost certain to succeed in one of the 20 projects.
Diversifying risk through multiple projects:
Probabiltiy of total failure ----- Probability of single success
Run a single project
80% (0.8) ---- 20% (0.2)
Run two projects
64% (0.8x0.8) ---- 36% (0.36)
Run three projects
51.2% (0.8x0.8x0.8) ---- 48.8% (0.488)
Run 20 projects
1% (0.8^20) ---- 99% (0.99)
This illustrates how diversification can improve the chances of success, although at a price. Running 20 projects will be much more expensive than running one. But it may be that 20 modest projects, each researching a different potential product, are a better way forward than a single 'all or nothing' project puttting lots of resource into a single product.
An important point to remember is that the 'winners' must pay for the 'losers' if you choose to go for diversification. The business must be able to afford to take all these risks, with all their respective potential downsides, and be confident that there is no risk of bankruptcy as a result.
Responding to risks: Minimising risks
If you choose to minimise a risk, you accept that it can't be eliminated, but take action to reduce its probability or negative impact (or both). Minimising probability means taking actions so that a negative outcome is less likely to occur; minimising impact means taking actions so that the consequences will be less severe if a negative outcome does occur.
We can see this in action by considering our own lifestyle choices. By choosing a healthy diet and exercising well, we minimise the probability of health problems in later life. By taking out health insurance, we hope to minimise the impact if they do occur. Clearly, we could do both these things - minimising both probability and impact as a result. How much action we take to minimise a risk, and the kind of actions we favour, depends on our own priorities, plus (as always) our assessment of probability and impact. If our past medical history suggested we were more at risk from health problems, we might be more motivated to take action.
A parallel from business would be typical responses to operational risks. Employees should be protected from physical harm wherever possible (minimising probability), but the employer is also obliged to have systems in place to deal with injuries should they occur (minimising impact).
Another example of minimising impact is double redundancy in computer systems. Here an entire duplicate system is created and maintained, so that it can take over in the event of malfunction. This hugely reduces the potential impact (though not the probability) of crucial data systems going offline; there is of course a trade-off in terms of cost. This is often the case: in general, the more you reduce impact, the more cost is involved. The business might choose to instate a repair contract with an IT service company instead, but this would not provide the same reduction of impact as the double-redundancy system.
We can see this in action by considering our own lifestyle choices. By choosing a healthy diet and exercising well, we minimise the probability of health problems in later life. By taking out health insurance, we hope to minimise the impact if they do occur. Clearly, we could do both these things - minimising both probability and impact as a result. How much action we take to minimise a risk, and the kind of actions we favour, depends on our own priorities, plus (as always) our assessment of probability and impact. If our past medical history suggested we were more at risk from health problems, we might be more motivated to take action.
A parallel from business would be typical responses to operational risks. Employees should be protected from physical harm wherever possible (minimising probability), but the employer is also obliged to have systems in place to deal with injuries should they occur (minimising impact).
Another example of minimising impact is double redundancy in computer systems. Here an entire duplicate system is created and maintained, so that it can take over in the event of malfunction. This hugely reduces the potential impact (though not the probability) of crucial data systems going offline; there is of course a trade-off in terms of cost. This is often the case: in general, the more you reduce impact, the more cost is involved. The business might choose to instate a repair contract with an IT service company instead, but this would not provide the same reduction of impact as the double-redundancy system.
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