Oil & gas sector ripe for upward re-rating
Tags: Alam Maritim Resources Bhd | Barrow Island | Chevron Corp | enhanced oil recovery | EOR | Exxon Mobil Corp | Gorgon project | Handal Resources Bhd | Jason Yap | Kencana Petroleum Bhd | liquefied natural gas | LNG | O&G | oil and gas sector | OSK Research Sdn Bhd | Petra Group | Petroliam Nasional Bhd | Petronas | Royal Dutch Shell plc | Tanjung Offshore Bhd | Wah Seong Corp Bhd
Written by Chong Jin Hun
Tuesday, 06 October 2009 22:46
KUALA LUMPUR: The Malaysian oil and gas (O&G) sector could be ripe for an upward re-rating in anticipation of support services firms being awarded new contracts by oil majors as demand for crude oil recovers amid an improving global economic landscape.
Valuations for O&G support services firms are deemed attractive at current prices, according to OSK Research Sdn Bhd analyst Jason Yap. He noted that average sector valuations are trading below a price-to-earnings ratio (PER) of 10 times financial year 2010 earnings, compared with a historical PER of between 18 and 20 times.
"Once the tap is turned on and contracts start to flow, the future earnings of local supporting O&G companies would be upgraded and a fundamental upward re-rating on the sector would follow.
"There has been no major O&G contract award in the past one year and we believe these are due anytime now," Yap wrote in a note to clients yesterday.
Yap, who likes O&G firms like ALAM MARITIM RESOURCES BHD [], KENCANA PETROLEUM BHD [] and Wah Seong Corp Bhd, is retaining his outperform call on the sector.
The industry is deemed fairly valued at a higher PER of 11 times, an upgrade from the nine times estimated earlier. The upward revision is in anticipation of new jobs in the pipeline.
O&G support services include fabrication of O&G facilities, pipe coating, installation of pipeline and facilities, engineering, procurement and CONSTRUCTION [] and provision of offshore supply vessels (OSV).
Several global large-scale projects involving local companies are worth noting. These include Australia's Gorgon liquefied natural gas (LNG) project, which includes the construction of an LNG facility with an annual capacity of some 15 million tonnes on Barrow Island, off Western Australia.
The Gorgon LNG initiative, one of the world's largest, is a collaboration among three oil majors — Chevron Corp, Exxon Mobil Corp and Royal Dutch Shell plc. Based on news reports, the initial phase of the project is valued at some A$43 billion (RM132.69 billion).
Malaysian entities including process equipment maker KNM GROUP BHD [] and pipe-coating specialist Wah Seong are among bidders for the job, Yap said, quoting sources.
In Malaysia, Exxon Mobil and Petroliam Nasional Bhd (Petronas) had signed a production-sharing contract to develop seven existing oil fields off the peninsula. These include the Seligi, Guntong, Tapis, Semangkok, Irong Barat, Tabu and Palas fields, which are mostly off the coast of Terengganu.
Both parties had agreed to spend at least US$2.1 billion (RM7.22 billion) on major enhanced oil recovery (EOR) operations, rejuvenation of facilities and further development and drilling activities in the fields.
OSK said potential beneficiaries of the project included OSV players like Alam Maritim, Petra Group and TANJUNG OFFSHORE BHD [], besides crane manufacturer Handal Resources Bhd.
Oil sands projects, which involve companies like KNM, are an area to watch as oil prices gained momentum.
"With oil prices building a new base at US$70 a barrel, we believe it would be a matter of time before oil sands projects, which were previously abandoned owing to unfavourable oil price, are revived," said Yap.
Crude oil prices have more than doubled to US$70 a barrel from about US$30 a barrel early this year. The commodity almost touched US$150 a barrel in the middle of last year. OSK estimated that the commodity would be transacted at between US$70 and US$80 a barrel next year.
"We believe crude oil prices should go up in 2010 in line with a better global economic outlook and spur the award of new O&G projects," Yap said.
While a rise in crude oil prices was often associated with the weakness of the US dollar, Yap said the major driver of crude prices was an anticipation of a recovery in the global economy and higher demand for the hydrocarbon resource.
"Also, there is a very real possibility of a scarcity of oil supply starting from the next few years since most of the oil majors have been holding back the bulk of their capex on new O&G projects in the past one year," Yap said.
Sunday 11 October 2009
A boon for 3A in Wilmar
A boon for 3A in Wilmar
Tags: Fang Chew Ham | Three-A-Resources Bhd (3A) | Wilmar Intenational Ltd
Written by Cindy Yeap
Tuesday, 06 October 2009 10:46
KUALA LUMPUR: In a surprise move seen as further diversifying downstream, global PLANTATION [] player Wilmar International Ltd is set to emerge as the second-largest shareholder in food and beverage ingredients manufacturer THREE-A RESOURCES BHD [] (3A).
The exercise is the first step towards more partnerships ahead, including for potential joint overseas acquisitions, 3A, a nondescript Main Market company said in a statement to Bursa Malaysia yesterday.
Wilmar, a Singapore-listed plantation and palm oil processor, is set to pay RM46.2 million or 75 sen per share for a 16.67% stake in 3A’s enlarged share capital via a proposed private placement of up to 61.6 million shares, or 20% of its existing share base, 3A said.
“Wilmar has given a letter stating that it is interested to subscribe for 61.6 million placement shares at 75 sen per share… The proposed private placement is to enable 3A Resources and Wilmar to collectively venture into any future overseas investment,” 3A said in the statement.
The Malaysian company produces, among others, caramel colour, glucose syrup and soya protein sauce that are used in the processing of food. Its maltodextrin plant is the only one in the country and plans are underway to set up an additional plant by the end of next year, according to a note dated Aug 14 by Asia Analytica Sdn Bhd.
Maltodextrin is a white powder with little sweetness that is widely used as fillers or bulking agent.
After the completion of the placement, Wilmar, which recently delayed the listing of its Hong Kong unit, will end up as the second-largest shareholder in 3A.
The 75-sen indicative issue price represents a 12.63% discount to 3A’s five-day weighted average market price up to Oct 2 of 85.84 sen. The indicative issue price is at a 21.9% discount to 3A’s 96 sen closing price yesterday. The stock, which rose to as high as 97.5 sen intra-day yesterday, ended the day up 13.5 sen, or 16.36%, with 12.7 million shares done.
Standard & Poor’s has a hold recommendation on 3A with a 60 sen price target as at Aug 14, according to Bloomberg data.
The RM46.2 million proceeds from the private placement will be used as working capital as well as for “new overseas investment” after deducting some RM400,000 in estimated expenses, 3A said, without elaborating on the possible acquisitions abroad.
The indicative proceeds are set to boost 3A’s net asset per share to 34 sen from 26 sen as at Dec 31, 2009. The enlarged share base of 369.6 million shares (from 308 million shares currently) will also see its gearing fall to 0.36 times from 0.57 times.
The proposed private placement, which needs the approval of shareholders of the Malaysian company, is expected to be completed in the fourth quarter of 2009 and is not expected to have a material effect on earnings for the current year ending Dec 31, 2009, 3A said.
While 3A’s earnings per share (EPS) may see a corresponding reduction with the 20% larger share base, the company expects proceeds from the private placement to be used for overseas investments which are expected to contribute positively to future earnings.
Fang Chew Ham and family, currently 3A’s single largest shareholder, will see their collective shareholding diluted to 37.2% from 44.6% following the private placement. Lembaga Tabung Haji will become 3A’s third-largest shareholder with a 4.6% stake, down from 5.5% as at Sept 30, 2009.
3A has appointed OSK Investment Bank as adviser for the proposed private placement, and applications for the exercise will be submitted to the authorities within a month.
Wilmar, whose shareholders include the Kuok Group, fell six cents, or 0.98%, to S$6.05 with 6.8 million shares done yesterday. It had not made an announcement to the Singapore exchange at press time.
This article appeared in The Edge Financial Daily, October 6, 2009.
Tags: Fang Chew Ham | Three-A-Resources Bhd (3A) | Wilmar Intenational Ltd
Written by Cindy Yeap
Tuesday, 06 October 2009 10:46
KUALA LUMPUR: In a surprise move seen as further diversifying downstream, global PLANTATION [] player Wilmar International Ltd is set to emerge as the second-largest shareholder in food and beverage ingredients manufacturer THREE-A RESOURCES BHD [] (3A).
The exercise is the first step towards more partnerships ahead, including for potential joint overseas acquisitions, 3A, a nondescript Main Market company said in a statement to Bursa Malaysia yesterday.
Wilmar, a Singapore-listed plantation and palm oil processor, is set to pay RM46.2 million or 75 sen per share for a 16.67% stake in 3A’s enlarged share capital via a proposed private placement of up to 61.6 million shares, or 20% of its existing share base, 3A said.
“Wilmar has given a letter stating that it is interested to subscribe for 61.6 million placement shares at 75 sen per share… The proposed private placement is to enable 3A Resources and Wilmar to collectively venture into any future overseas investment,” 3A said in the statement.
The Malaysian company produces, among others, caramel colour, glucose syrup and soya protein sauce that are used in the processing of food. Its maltodextrin plant is the only one in the country and plans are underway to set up an additional plant by the end of next year, according to a note dated Aug 14 by Asia Analytica Sdn Bhd.
Maltodextrin is a white powder with little sweetness that is widely used as fillers or bulking agent.
After the completion of the placement, Wilmar, which recently delayed the listing of its Hong Kong unit, will end up as the second-largest shareholder in 3A.
The 75-sen indicative issue price represents a 12.63% discount to 3A’s five-day weighted average market price up to Oct 2 of 85.84 sen. The indicative issue price is at a 21.9% discount to 3A’s 96 sen closing price yesterday. The stock, which rose to as high as 97.5 sen intra-day yesterday, ended the day up 13.5 sen, or 16.36%, with 12.7 million shares done.
Standard & Poor’s has a hold recommendation on 3A with a 60 sen price target as at Aug 14, according to Bloomberg data.
The RM46.2 million proceeds from the private placement will be used as working capital as well as for “new overseas investment” after deducting some RM400,000 in estimated expenses, 3A said, without elaborating on the possible acquisitions abroad.
The indicative proceeds are set to boost 3A’s net asset per share to 34 sen from 26 sen as at Dec 31, 2009. The enlarged share base of 369.6 million shares (from 308 million shares currently) will also see its gearing fall to 0.36 times from 0.57 times.
The proposed private placement, which needs the approval of shareholders of the Malaysian company, is expected to be completed in the fourth quarter of 2009 and is not expected to have a material effect on earnings for the current year ending Dec 31, 2009, 3A said.
While 3A’s earnings per share (EPS) may see a corresponding reduction with the 20% larger share base, the company expects proceeds from the private placement to be used for overseas investments which are expected to contribute positively to future earnings.
Fang Chew Ham and family, currently 3A’s single largest shareholder, will see their collective shareholding diluted to 37.2% from 44.6% following the private placement. Lembaga Tabung Haji will become 3A’s third-largest shareholder with a 4.6% stake, down from 5.5% as at Sept 30, 2009.
3A has appointed OSK Investment Bank as adviser for the proposed private placement, and applications for the exercise will be submitted to the authorities within a month.
Wilmar, whose shareholders include the Kuok Group, fell six cents, or 0.98%, to S$6.05 with 6.8 million shares done yesterday. It had not made an announcement to the Singapore exchange at press time.
This article appeared in The Edge Financial Daily, October 6, 2009.
Money flowing intotop three banks
Money flowing intotop three banks
Tags: CIMB Group Holdings Bhd | Malayan Banking Bhd | Public Bank Bhd | Top three banks
Written by Joyce Goh
Tuesday, 06 October 2009 10:32
PETALING JAYA: Investors have been seizing opportunities to pick up banking stocks on the back of their weaker share prices last week. For the week ended Oct 2, investors purchased some RM38.96 million worth of stock in Bloomberg’s top 20 buying-on-weakness, a list of which the top three banks in the country emerged on the top three spots.
The second largest bank in terms of assets — CIMB Group Holdings Bhd — saw the highest inflow of funds in terms of value, following a 0.2% decline in its share price week-on-week. The decline caused a two sen drop in share price to RM11.14 but investors acquired RM6.66 million worth of the banking group’s stock.
Meanwhile, PUBLIC BANK BHD []’s share price fell eight sen in a week closing at RM10.18 last Friday. This change of 0.8% did not deter investors who acquired RM6.65 million worth of the stock in the country’s third largest bank.
The largest bank in the country — MALAYAN BANKING BHD [] (Maybank) — saw an inflow of RM5.71 million into the stock following its share price falling 0.6% week-on-week. The stock ended at RM6.64 last Friday, down four sen from a week before.
When asked on this, banking analysts believe this trend could be driven by two factors — investors’ rising confidence in the sector as well as the fact that the top three banks make up quite a bit of the FBM KUALA LUMPUR COMPOSITE INDEX [] weightage.
“The top three banks in Bursa make up 30% in terms of the weightage in FBMKLCI 30. Therefore, when there is share price weakness, there’ll be funds that will come in and support it. So it (money flowing into the stocks due to share price weakness) could be because of that,” Maybank Investment Bank Research’s senior analyst Wong Chew Hann told The Edge Financial Daily.
“It could also be because investors are expecting improved earnings to flow into banks as the economy slowly mends itself. On top of that, their asset quality is intact. Overall, our banks are on steady ground,” she said.
Wong said banks are expected to see loans growth this year, albeit a slower growth compared to last year. “We are looking at 6% loans growth for the sector. Last year was 12.9%. We also think that 2010 will not be as good as 2008... looking at single digits growth. Our house view is that the economy will rebound next year but we will not be seeing that 5% to 7% GDP growth,” she noted.
CIMB ended yesterday at its 52-week high of RM11.50, up 36 sen from its close last Friday while Maybank added one sen for the same period to RM6.65.
Public Bank ended Monday unchanged from its close last Friday of RM10.18.
This article appeared in The Edge Financial Daily, October 6, 2009.
Tags: CIMB Group Holdings Bhd | Malayan Banking Bhd | Public Bank Bhd | Top three banks
Written by Joyce Goh
Tuesday, 06 October 2009 10:32
PETALING JAYA: Investors have been seizing opportunities to pick up banking stocks on the back of their weaker share prices last week. For the week ended Oct 2, investors purchased some RM38.96 million worth of stock in Bloomberg’s top 20 buying-on-weakness, a list of which the top three banks in the country emerged on the top three spots.
The second largest bank in terms of assets — CIMB Group Holdings Bhd — saw the highest inflow of funds in terms of value, following a 0.2% decline in its share price week-on-week. The decline caused a two sen drop in share price to RM11.14 but investors acquired RM6.66 million worth of the banking group’s stock.
Meanwhile, PUBLIC BANK BHD []’s share price fell eight sen in a week closing at RM10.18 last Friday. This change of 0.8% did not deter investors who acquired RM6.65 million worth of the stock in the country’s third largest bank.
The largest bank in the country — MALAYAN BANKING BHD [] (Maybank) — saw an inflow of RM5.71 million into the stock following its share price falling 0.6% week-on-week. The stock ended at RM6.64 last Friday, down four sen from a week before.
When asked on this, banking analysts believe this trend could be driven by two factors — investors’ rising confidence in the sector as well as the fact that the top three banks make up quite a bit of the FBM KUALA LUMPUR COMPOSITE INDEX [] weightage.
“The top three banks in Bursa make up 30% in terms of the weightage in FBMKLCI 30. Therefore, when there is share price weakness, there’ll be funds that will come in and support it. So it (money flowing into the stocks due to share price weakness) could be because of that,” Maybank Investment Bank Research’s senior analyst Wong Chew Hann told The Edge Financial Daily.
“It could also be because investors are expecting improved earnings to flow into banks as the economy slowly mends itself. On top of that, their asset quality is intact. Overall, our banks are on steady ground,” she said.
Wong said banks are expected to see loans growth this year, albeit a slower growth compared to last year. “We are looking at 6% loans growth for the sector. Last year was 12.9%. We also think that 2010 will not be as good as 2008... looking at single digits growth. Our house view is that the economy will rebound next year but we will not be seeing that 5% to 7% GDP growth,” she noted.
CIMB ended yesterday at its 52-week high of RM11.50, up 36 sen from its close last Friday while Maybank added one sen for the same period to RM6.65.
Public Bank ended Monday unchanged from its close last Friday of RM10.18.
This article appeared in The Edge Financial Daily, October 6, 2009.
Glovemakers surge on upbeat reports on Top Glove
Glovemakers surge on upbeat reports on Top Glove
Tags: Adventa Bhd | AmResearch Sdn Bhd | Glovemakers | Hartalega Holdings Bhd | Kossan Rubber Industries Bhd | Latexx Partners Bhd | Maybank IB | Maybank Investment Bank Bhd | Supermax Corporation Bhd | Top Glove Corporation Bhd
Written by Surin Murugiah
Tuesday, 06 October 2009 23:18
KUALA LUMPUR: Glovemakers advanced today after analysts issued upbeat reports on TOP GLOVE CORPORATION BHD [] ahead of the release of the company's fourth quarter (4Q) results scheduled for Thursday, and on the outlook for the rubber glove sector.
AmResearch Sdn Bhd said that the demand outlook for rubber gloves remained intact at a healthy 8% to 10% growth per annum, adding that the (A)H1N1-related buying was estimated to have spurred global demand by an additional 14 billion to 15 billion pieces, on top of the 11 billion to 17 billion pieces from organic growth.
Top Glove surged to its highest level since Aug 2, 2007, today, jumping 5.5% or 41 sen to RM7.87, after Maybank Investment Bank Bhd (Maybank IB) and AmResearch both maintained their buy calls on the stock at RM7.46, with the former saying the company's 4Q09 results were expected to beat street estimates.
KOSSAN RUBBER INDUSTRIES BHD [] gained 3.22% or 14 sen to RM4.49, its highest close since Sept 28, 2007.
Meanwhile, LATEXX PARTNERS BHD [] jumped 7.14% or 15 sen to RM2.25; SUPERMAX CORPORATION BHD [] up 3.85% or 10 sen to RM2.70; ADVENTA BHD [] up 3.70% or 6 sen to RM1.68 while HARTALEGA HOLDINGS BHD [] added 2.52% or 13 sen to RM5.29.
Maybank IB said Top Glove's 4Q09 results should meet the research house's expectations, but above consensus while dividends may surprise.
"We continue to like Top Glove's commanding market leadership in the sector, earnings growth potential and solid balance sheet," said Maybank IB, which maintained its target price for the stock at RM8.30.
The research house said Top Glove's 4Q net profit could reach RM55 million to RM56 million, which would bring its full-year net profit to RM166 million to RM167 million, in line with its own but above street estimates of RM154 million.
"Growth drivers would come from the surge in orders (+10%-20% quarter-on-quarter) and expansion in earnings before interest and tax (Ebit) margins (+3%-4% q-o-q), capitalising on the (A)H1N1 flu outbreak whilst making headway into the Latin America market (Brazil and Argentina).
"Furthermore, a lower interest expense following the retirement of RM70 million in debt and cost savings from lower input costs were not fully passed on to customers. Latex cost, 52% of its operational expenditure, fell 14% q-o-q to RM3.80 per kg in June-August," it said.
The research house also said Top Glove's net cash position was believed to have grown for the fourth consecutive quarter, improving by about 40% q-o-q.
"With a higher cash pile, Top Glove may surprise with a higher dividend payout (FY08: 30%).
"Assuming a 40% payout (22 sen dividend per share), this will entail a dividend of 15 sen per share (+150% year-on-year) in 4Q. Top Glove had paid a 7 sen interim dividend year-to-date," it said.
Meanwhile, AmResearch raised its fair value for Top Glove to RM8.45 from RM8.30, and said it had raised its FY09-11 earnings forecast for the company by 2% to 8%.
It said the growth would be underpinned by slightly higher revenue growth from prospects of higher recurring orders coming mainly from sales of basic powdered gloves to Latin American countries, and better-than-expected sustainable margin going forward due to higher average selling prices and lower overall cost structures. "As such, we have increased our FY10F and FY11F dividend forecasts to 18 and 19 sen per share, respectively, premised on a 30% dividend payout.
"We are however, keeping our forecast of 15 sen per share for FY09F, but would not be surprised if management were to choose to reward shareholders. The group is in a strong net cash position with cash holdings of RM173 million as at 9MFY09," it said.
AmResearch said that Top Glove's expansion to boost installed capacity by about 10% to 34.5 billion pieces of gloves per annum from an additional 32 production lines by end-FY10F was on schedule.
It said the company's Factory 20 was set for completion by February 2010 and Factory 21 by July 2010.
"Though the stock has outperformed the FBM KLCI by 51% on a relative basis year-to-date, valuation is still undemanding as it is still valued below its historical 9-year average of 15 times.
"We reiterate our buy on the group's proven earnings deliverance backed by solid fundamentals, market share dominance in the industry, as well as better trading liquidity," it said, adding that the fair value of RM8.45 offered 18% upside potential.
Tags: Adventa Bhd | AmResearch Sdn Bhd | Glovemakers | Hartalega Holdings Bhd | Kossan Rubber Industries Bhd | Latexx Partners Bhd | Maybank IB | Maybank Investment Bank Bhd | Supermax Corporation Bhd | Top Glove Corporation Bhd
Written by Surin Murugiah
Tuesday, 06 October 2009 23:18
KUALA LUMPUR: Glovemakers advanced today after analysts issued upbeat reports on TOP GLOVE CORPORATION BHD [] ahead of the release of the company's fourth quarter (4Q) results scheduled for Thursday, and on the outlook for the rubber glove sector.
AmResearch Sdn Bhd said that the demand outlook for rubber gloves remained intact at a healthy 8% to 10% growth per annum, adding that the (A)H1N1-related buying was estimated to have spurred global demand by an additional 14 billion to 15 billion pieces, on top of the 11 billion to 17 billion pieces from organic growth.
Top Glove surged to its highest level since Aug 2, 2007, today, jumping 5.5% or 41 sen to RM7.87, after Maybank Investment Bank Bhd (Maybank IB) and AmResearch both maintained their buy calls on the stock at RM7.46, with the former saying the company's 4Q09 results were expected to beat street estimates.
KOSSAN RUBBER INDUSTRIES BHD [] gained 3.22% or 14 sen to RM4.49, its highest close since Sept 28, 2007.
Meanwhile, LATEXX PARTNERS BHD [] jumped 7.14% or 15 sen to RM2.25; SUPERMAX CORPORATION BHD [] up 3.85% or 10 sen to RM2.70; ADVENTA BHD [] up 3.70% or 6 sen to RM1.68 while HARTALEGA HOLDINGS BHD [] added 2.52% or 13 sen to RM5.29.
Maybank IB said Top Glove's 4Q09 results should meet the research house's expectations, but above consensus while dividends may surprise.
"We continue to like Top Glove's commanding market leadership in the sector, earnings growth potential and solid balance sheet," said Maybank IB, which maintained its target price for the stock at RM8.30.
The research house said Top Glove's 4Q net profit could reach RM55 million to RM56 million, which would bring its full-year net profit to RM166 million to RM167 million, in line with its own but above street estimates of RM154 million.
"Growth drivers would come from the surge in orders (+10%-20% quarter-on-quarter) and expansion in earnings before interest and tax (Ebit) margins (+3%-4% q-o-q), capitalising on the (A)H1N1 flu outbreak whilst making headway into the Latin America market (Brazil and Argentina).
"Furthermore, a lower interest expense following the retirement of RM70 million in debt and cost savings from lower input costs were not fully passed on to customers. Latex cost, 52% of its operational expenditure, fell 14% q-o-q to RM3.80 per kg in June-August," it said.
The research house also said Top Glove's net cash position was believed to have grown for the fourth consecutive quarter, improving by about 40% q-o-q.
"With a higher cash pile, Top Glove may surprise with a higher dividend payout (FY08: 30%).
"Assuming a 40% payout (22 sen dividend per share), this will entail a dividend of 15 sen per share (+150% year-on-year) in 4Q. Top Glove had paid a 7 sen interim dividend year-to-date," it said.
Meanwhile, AmResearch raised its fair value for Top Glove to RM8.45 from RM8.30, and said it had raised its FY09-11 earnings forecast for the company by 2% to 8%.
It said the growth would be underpinned by slightly higher revenue growth from prospects of higher recurring orders coming mainly from sales of basic powdered gloves to Latin American countries, and better-than-expected sustainable margin going forward due to higher average selling prices and lower overall cost structures. "As such, we have increased our FY10F and FY11F dividend forecasts to 18 and 19 sen per share, respectively, premised on a 30% dividend payout.
"We are however, keeping our forecast of 15 sen per share for FY09F, but would not be surprised if management were to choose to reward shareholders. The group is in a strong net cash position with cash holdings of RM173 million as at 9MFY09," it said.
AmResearch said that Top Glove's expansion to boost installed capacity by about 10% to 34.5 billion pieces of gloves per annum from an additional 32 production lines by end-FY10F was on schedule.
It said the company's Factory 20 was set for completion by February 2010 and Factory 21 by July 2010.
"Though the stock has outperformed the FBM KLCI by 51% on a relative basis year-to-date, valuation is still undemanding as it is still valued below its historical 9-year average of 15 times.
"We reiterate our buy on the group's proven earnings deliverance backed by solid fundamentals, market share dominance in the industry, as well as better trading liquidity," it said, adding that the fair value of RM8.45 offered 18% upside potential.
RHB Research: Maybank’s ROE still sub-par
RHB Research: Maybank’s ROE still sub-par
Tags: BII | Brokers Call | MCB Bank | Myabank | RHB Research
Written by Financial Daily
Wednesday, 07 October 2009 10:20
RHB Research noted that post MALAYAN BANKING BHD []’s (Maybank) FY09 results, the uncertainties surrounding the impairment on Bank Internasional Indonesia (BII) and MCB Bank of Pakistan would be eliminated.
“However, the aftermath (interest expense from hybrid and sub debt raised as well as dilution from the rights issue) from the expensive acquisitions means that its return on equity (ROE) will be sub-par over the next two to three years,” it said.
“Although BII’s prospects are promising (given a high-margin, low-penetration rate market environment in Indonesia), the group as a whole would need to integrate and ensure strong risk management and processes before embarking to realise the potential of BII. This would take two to three years before it returns to pre-acquisition ROE of 15% to 16%,” it added.
RHB Research maintained its underperform call on Maybank, pegging the stock’s fair value at RM5.97.
It added that earnings growth for the largest bank in the country seem to be intact.
“This is on the back of strong growth during the first two months of FY06/2010 (as transformation is slowly bearing fruits), high single-digit loan growth for the group (with the star being BII) and no kitchen sinking at BII (as full integration of provisioning policy has limited impact on P&L) to derail the expansion trajectory,” it noted.
RHB Research also said that BII is the focus for the future growth of Maybank.
“This is to capitalise on an underserved market with high margin. Besides transformation and expansion in BII, WOM Finance (providing motorcycle financing) will be another focal point. However, due to the latter’s track record, we are cautious about management’s optimism.”
RHB Research maintained its conservative projection of Maybank’s ROE for FY2010 to be at 10.2%, adding that it assumed the bank’s dividend payout to be 60% for FY2010 to FY2012.
Maybank gained six sen to close at RM6.71 yesterday.
This article appeared in The Edge Financial Daily, October 7, 2009.
Tags: BII | Brokers Call | MCB Bank | Myabank | RHB Research
Written by Financial Daily
Wednesday, 07 October 2009 10:20
RHB Research noted that post MALAYAN BANKING BHD []’s (Maybank) FY09 results, the uncertainties surrounding the impairment on Bank Internasional Indonesia (BII) and MCB Bank of Pakistan would be eliminated.
“However, the aftermath (interest expense from hybrid and sub debt raised as well as dilution from the rights issue) from the expensive acquisitions means that its return on equity (ROE) will be sub-par over the next two to three years,” it said.
“Although BII’s prospects are promising (given a high-margin, low-penetration rate market environment in Indonesia), the group as a whole would need to integrate and ensure strong risk management and processes before embarking to realise the potential of BII. This would take two to three years before it returns to pre-acquisition ROE of 15% to 16%,” it added.
RHB Research maintained its underperform call on Maybank, pegging the stock’s fair value at RM5.97.
It added that earnings growth for the largest bank in the country seem to be intact.
“This is on the back of strong growth during the first two months of FY06/2010 (as transformation is slowly bearing fruits), high single-digit loan growth for the group (with the star being BII) and no kitchen sinking at BII (as full integration of provisioning policy has limited impact on P&L) to derail the expansion trajectory,” it noted.
RHB Research also said that BII is the focus for the future growth of Maybank.
“This is to capitalise on an underserved market with high margin. Besides transformation and expansion in BII, WOM Finance (providing motorcycle financing) will be another focal point. However, due to the latter’s track record, we are cautious about management’s optimism.”
RHB Research maintained its conservative projection of Maybank’s ROE for FY2010 to be at 10.2%, adding that it assumed the bank’s dividend payout to be 60% for FY2010 to FY2012.
Maybank gained six sen to close at RM6.71 yesterday.
This article appeared in The Edge Financial Daily, October 7, 2009.
Kuok Khoon Ho quits Transmile board
Kuok Khoon Ho quits Transmile board
Tags: Kuok Brothers Sdn Bhd | Kuok Khoon Ho | resignation | Transmile Group Bhd
Written by Financial Daily
Wednesday, 07 October 2009 10:36
KUALA LUMPUR: Beleaguered TRANSMILE GROUP BHD [] saw the resignation of non-independent and non-executive director Kuok Khoon Ho.
The air transportation company said Kuok’s resignation took effect yesterday. He had been with the board since April 2004.
Kuok, 59, is the chairman of Kuok Brothers Sdn Bhd, which holds a 17.99% stake in Transmile or 48.6 million shares. Kuok himself holds 50,000 shares.
Transmile has borrowings of up to RM575.29 million as of June 30, 2009. It posted net loss of RM449,000 on the back of RM38.53 million in revenue in the second quarter ended June 30.
The company, which was a darling of foreign investors, was once trading at a high of RM13 in May 2007. But since then, its share price has plunged after the uncovering of massive financial irregularities. The stock closed unchanged at RM1.16 yesterday.
The Securities Commission had in July preferred criminal charges against Transmile’s former chief executive officer Gan Boon Aun, former chief financial officer Lo Chok Ping and executive director Khiudin Mohd under the Securities Industry Act 1983.
The charges were for abetting Transmile in making a statement that was misleading, in particular relating to revenue in the unaudited consolidated results for the financial year ended Dec 31, 2006. The misleading statement was in relation to its reported revenue of RM338.47 million.
However, in May last year, the SC withdrew the charge against Lo after he paid a compound of RM700,000.
This article appeared in The Edge Financial Daily, October 7, 2009.
Tags: Kuok Brothers Sdn Bhd | Kuok Khoon Ho | resignation | Transmile Group Bhd
Written by Financial Daily
Wednesday, 07 October 2009 10:36
KUALA LUMPUR: Beleaguered TRANSMILE GROUP BHD [] saw the resignation of non-independent and non-executive director Kuok Khoon Ho.
The air transportation company said Kuok’s resignation took effect yesterday. He had been with the board since April 2004.
Kuok, 59, is the chairman of Kuok Brothers Sdn Bhd, which holds a 17.99% stake in Transmile or 48.6 million shares. Kuok himself holds 50,000 shares.
Transmile has borrowings of up to RM575.29 million as of June 30, 2009. It posted net loss of RM449,000 on the back of RM38.53 million in revenue in the second quarter ended June 30.
The company, which was a darling of foreign investors, was once trading at a high of RM13 in May 2007. But since then, its share price has plunged after the uncovering of massive financial irregularities. The stock closed unchanged at RM1.16 yesterday.
The Securities Commission had in July preferred criminal charges against Transmile’s former chief executive officer Gan Boon Aun, former chief financial officer Lo Chok Ping and executive director Khiudin Mohd under the Securities Industry Act 1983.
The charges were for abetting Transmile in making a statement that was misleading, in particular relating to revenue in the unaudited consolidated results for the financial year ended Dec 31, 2006. The misleading statement was in relation to its reported revenue of RM338.47 million.
However, in May last year, the SC withdrew the charge against Lo after he paid a compound of RM700,000.
This article appeared in The Edge Financial Daily, October 7, 2009.
Dialog proposes 1 treasury share for 50 held
Dialog proposes 1 treasury share for 50 held
Tags: Dialog | divbidend | treasury share
Written by Joseph Chin
Wednesday, 07 October 2009 18:32
KUALA LUMPUR: DIALOG GROUP BHD [] has declared a proposed special share dividend of one treasury share for every 50 shares held, amounting to 27.71 million treasury shares, to be distributed for the financial year ended June 30, 2009.
Dialog said on Wednesday, Oct 7 the proposed special share dividend is to commemorate the 25-year anniversary of incorporation of Dialog group of companies. The entitlement date has yet to be fixed.
"Together with cash dividends (interim and proposed final) of 36% less 25% tax, total gross dividend rate for FY2009 is 57.6%," it said, adding the dividend payout ratio for FY2009 is 74%.
Based on Dialog's five-day volume weighted average share price of RM1.2424 as at Oct 6, the gross dividend yield is 4.6%.
This is the second time the company is distributing share dividend. The first time was when it distributed one treasury share for every 50 shares held for FY ended June 30, 2006 to commemorate its 10-year anniversary of listing on Bursa Malaysia Securities Bhd.
The proposed special share dividend and the proposed final cash dividend of 24% less 25% tax are subject to shareholders’ approvals at the forthcoming AGM.
Tags: Dialog | divbidend | treasury share
Written by Joseph Chin
Wednesday, 07 October 2009 18:32
KUALA LUMPUR: DIALOG GROUP BHD [] has declared a proposed special share dividend of one treasury share for every 50 shares held, amounting to 27.71 million treasury shares, to be distributed for the financial year ended June 30, 2009.
Dialog said on Wednesday, Oct 7 the proposed special share dividend is to commemorate the 25-year anniversary of incorporation of Dialog group of companies. The entitlement date has yet to be fixed.
"Together with cash dividends (interim and proposed final) of 36% less 25% tax, total gross dividend rate for FY2009 is 57.6%," it said, adding the dividend payout ratio for FY2009 is 74%.
Based on Dialog's five-day volume weighted average share price of RM1.2424 as at Oct 6, the gross dividend yield is 4.6%.
This is the second time the company is distributing share dividend. The first time was when it distributed one treasury share for every 50 shares held for FY ended June 30, 2006 to commemorate its 10-year anniversary of listing on Bursa Malaysia Securities Bhd.
The proposed special share dividend and the proposed final cash dividend of 24% less 25% tax are subject to shareholders’ approvals at the forthcoming AGM.
Ringgit weakest in more than a year versus Aussie
Ringgit weakest in more than a year versus Aussie
Tags: Australian dollar | Azrul Azwar | Bank Islam Malaysia Bhd | Bank Negara Malaysia | Canada | New Zealand | Ringgit | Weakest level
Written by Chong Jin Hun
Thursday, 08 October 2009 11:00
KUALA LUMPUR : The ringgit traded at its weakest level against a firmer Australian dollar in more than a year yesterday, after policymakers in Australia unexpectedly raised its key interest rate to 3.25% from 3%, prompting demand for the Australian dollar.
Investors tend to park their money in countries with higher lending rates to capitalise on higher returns.
The ringgit weakened as low as 3.0619 versus the Australian dollar at 5.10am yesterday before strengthening to 3.0432 at 10.16am. A day earlier, the ringgit was traded at 3.0587 against the Australian dollar, the weakest in 14 months since August 2008, compared to the 2.2824 level seen in February this year
Economists said the surprise move by Australian lawmakers could result in similar initiatives among other commodity-based economies such as New Zealand and Canada.
“Countries that may follow suit could be other commodity-based economies, “ Bank Islam Malaysia Bhd senior economist Azrul Azwar told The Edge Financial Daily yesterday.
In Malaysia, while commodities like palm oil, and oil and gas, constitute a crucial component of the nation’s economy, Azrul said the country should not be regarded as a commodity-based entity.
Meanwhile, an improving economic climate in Malaysia is expected to see a stronger a ringgit versus a weakening US dollar.
Azrul said as recovery in the broader landscape was still tentative, a rapid appreciation of the ringgit might have a negative impact on the nation’s export competitiveness. However, a stronger ringgit could be one of the contributing factors in containing imported inflation.
“With increasing signs of improving economic conditions in Malaysia, and expectation of a resumption of positive GDP (gross domestic product) growth by the fourth quarter of 2009, the way forward for the ringgit is to strengthen.
“I think it is prudent to let market forces dictate the level of the ringgit but at the same time we should exercise an orderly and gradual strengthening of the ringgit,” he said.
Bank Negara Malaysia had pegged the ringgit at 3.80 against the US dollar on Sept 2, 1998 during the Asian financial crisis then. The fixed-exchange rate policy was scrapped on July 21, 2005, and replaced by a managed-float system which allows the central bank to monitor the ringgit’s value against a basket of currencies.
An interest rate hike in the US would trigger a sharp rebound in the US dollar. In its latest “Standard Chartered Global Focus” report, the bank said it did not foresee US policymakers initiating a rate hike throughout 2010.
“We think this is unlikely. We also believe that the US and the UK will continue to run wide fiscal deficits through 2010 — far larger as a share of GDP than those in the EM (emerging-market) economies. This, combined with ultra-loose monetary policy, may put continued negative pressure on both currencies,” Standard Chartered said.
This article appeared in The Edge Financial Daily, October 8, 2009.
Tags: Australian dollar | Azrul Azwar | Bank Islam Malaysia Bhd | Bank Negara Malaysia | Canada | New Zealand | Ringgit | Weakest level
Written by Chong Jin Hun
Thursday, 08 October 2009 11:00
KUALA LUMPUR : The ringgit traded at its weakest level against a firmer Australian dollar in more than a year yesterday, after policymakers in Australia unexpectedly raised its key interest rate to 3.25% from 3%, prompting demand for the Australian dollar.
Investors tend to park their money in countries with higher lending rates to capitalise on higher returns.
The ringgit weakened as low as 3.0619 versus the Australian dollar at 5.10am yesterday before strengthening to 3.0432 at 10.16am. A day earlier, the ringgit was traded at 3.0587 against the Australian dollar, the weakest in 14 months since August 2008, compared to the 2.2824 level seen in February this year
Economists said the surprise move by Australian lawmakers could result in similar initiatives among other commodity-based economies such as New Zealand and Canada.
“Countries that may follow suit could be other commodity-based economies, “ Bank Islam Malaysia Bhd senior economist Azrul Azwar told The Edge Financial Daily yesterday.
In Malaysia, while commodities like palm oil, and oil and gas, constitute a crucial component of the nation’s economy, Azrul said the country should not be regarded as a commodity-based entity.
Meanwhile, an improving economic climate in Malaysia is expected to see a stronger a ringgit versus a weakening US dollar.
Azrul said as recovery in the broader landscape was still tentative, a rapid appreciation of the ringgit might have a negative impact on the nation’s export competitiveness. However, a stronger ringgit could be one of the contributing factors in containing imported inflation.
“With increasing signs of improving economic conditions in Malaysia, and expectation of a resumption of positive GDP (gross domestic product) growth by the fourth quarter of 2009, the way forward for the ringgit is to strengthen.
“I think it is prudent to let market forces dictate the level of the ringgit but at the same time we should exercise an orderly and gradual strengthening of the ringgit,” he said.
Bank Negara Malaysia had pegged the ringgit at 3.80 against the US dollar on Sept 2, 1998 during the Asian financial crisis then. The fixed-exchange rate policy was scrapped on July 21, 2005, and replaced by a managed-float system which allows the central bank to monitor the ringgit’s value against a basket of currencies.
An interest rate hike in the US would trigger a sharp rebound in the US dollar. In its latest “Standard Chartered Global Focus” report, the bank said it did not foresee US policymakers initiating a rate hike throughout 2010.
“We think this is unlikely. We also believe that the US and the UK will continue to run wide fiscal deficits through 2010 — far larger as a share of GDP than those in the EM (emerging-market) economies. This, combined with ultra-loose monetary policy, may put continued negative pressure on both currencies,” Standard Chartered said.
This article appeared in The Edge Financial Daily, October 8, 2009.
Kamdar ICULS to be suspended from Oct 23
Kamdar ICULS to be suspended from Oct 23
Tags: Kamdar Group (M) Bhd | Kamdar ICULS | Kamdar Sdn Bhd | Woo Hing Brothers
Written by The Edge Financial Daily
Thursday, 08 October 2009 00:45
KUALA LUMPUR: Kamdar Group (M) Bhd’s five-year 3% irredeemable convertible unsecured loan stocks 2004/2009 (ICULS) will be suspended from trading from Oct 23 to facilitate the conversion of the ICULS into shares. The ICULS mature on Nov 9.
In a circular to the ICULS holders on Oct 7, Kamdar, a textile retailer, said that after the maturity date, the ICULS shall cease to bear interest and the remaining outstanding ICULS would be automatically converted into new Kamdar shares on a one-for-one basis.
As at Sept 14, 2009, Kamdar had RM71.59 million nominal value ICULS outstanding. The ICULS, which have a nominal value of RM1 each, closed at 24.5 sen on Oct 7, while Kamdar shares were last traded at 27 sen.
The ICULS were issued on Nov 10, 2004, during the reverse takeover of Woo Hing Brothers Bhd by the Kamdar group.
In the reverse takeover, Woo Hing Brothers acquired the entire interests in Kamdar Sdn Bhd, Pusat Membeli-Belah Kamdar Sdn Bhd, Pusat Membeli-Belah Kamdar (Penang) Sdn Bhd, Kamdar (South) Sdn Bhd and Kesar Sdn Bhd for a consideration of RM196.43 million. The purchase was satisfied by the issuance of 124.43 million new shares of RM1 each and the RM72 million ICULS.
Woo Hing had also acquired 100% equity interests in Kamdar Holdings Sdn Bhd, Kamdar Stores Sdn Bhd and Mint Saga Sdn Bhd for a total RM60 million satisfied via the issuance of RM60 million nominal a value five-year 4% bonds together with 50 million detachable five-year warrants.
As a result of the exercise, the Kamdar group took over the listing status of Woo Hing and was admitted to the Main Board of Bursa Malaysia on March 29, 2005, when it closed at its highest level ever of RM1.45. However, the company’s share price has since plunged to the current level of 27 sen, and as a result, brought down the value of the ICULS as well.
For the second quarter ended June 30, 2009, Kamdar’s net profit rose to RM1.86 million on revenue of RM43.68 million, compared to net profit RM201,000 a year earlier. The company has a market capitalisation of RM34.13 million comprising 126.4 million shares. Its market capitalisation is set to expand following the conversion of the ICULS into shares.
http://www.theedgemalaysia.com/business-news/150852-kamdar-iculs-to-besuspended-from-oct-23.html
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Tags: Kamdar Group (M) Bhd | Kamdar ICULS | Kamdar Sdn Bhd | Woo Hing Brothers
Written by The Edge Financial Daily
Thursday, 08 October 2009 00:45
KUALA LUMPUR: Kamdar Group (M) Bhd’s five-year 3% irredeemable convertible unsecured loan stocks 2004/2009 (ICULS) will be suspended from trading from Oct 23 to facilitate the conversion of the ICULS into shares. The ICULS mature on Nov 9.
In a circular to the ICULS holders on Oct 7, Kamdar, a textile retailer, said that after the maturity date, the ICULS shall cease to bear interest and the remaining outstanding ICULS would be automatically converted into new Kamdar shares on a one-for-one basis.
As at Sept 14, 2009, Kamdar had RM71.59 million nominal value ICULS outstanding. The ICULS, which have a nominal value of RM1 each, closed at 24.5 sen on Oct 7, while Kamdar shares were last traded at 27 sen.
The ICULS were issued on Nov 10, 2004, during the reverse takeover of Woo Hing Brothers Bhd by the Kamdar group.
In the reverse takeover, Woo Hing Brothers acquired the entire interests in Kamdar Sdn Bhd, Pusat Membeli-Belah Kamdar Sdn Bhd, Pusat Membeli-Belah Kamdar (Penang) Sdn Bhd, Kamdar (South) Sdn Bhd and Kesar Sdn Bhd for a consideration of RM196.43 million. The purchase was satisfied by the issuance of 124.43 million new shares of RM1 each and the RM72 million ICULS.
Woo Hing had also acquired 100% equity interests in Kamdar Holdings Sdn Bhd, Kamdar Stores Sdn Bhd and Mint Saga Sdn Bhd for a total RM60 million satisfied via the issuance of RM60 million nominal a value five-year 4% bonds together with 50 million detachable five-year warrants.
As a result of the exercise, the Kamdar group took over the listing status of Woo Hing and was admitted to the Main Board of Bursa Malaysia on March 29, 2005, when it closed at its highest level ever of RM1.45. However, the company’s share price has since plunged to the current level of 27 sen, and as a result, brought down the value of the ICULS as well.
For the second quarter ended June 30, 2009, Kamdar’s net profit rose to RM1.86 million on revenue of RM43.68 million, compared to net profit RM201,000 a year earlier. The company has a market capitalisation of RM34.13 million comprising 126.4 million shares. Its market capitalisation is set to expand following the conversion of the ICULS into shares.
http://www.theedgemalaysia.com/business-news/150852-kamdar-iculs-to-besuspended-from-oct-23.html
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Exxon regains top ranking
Exxon regains top ranking
Tags: Exxon Mobil Corp | PetroChina Co | Ranking
Written by Joe Carroll & Edward Klump
Thursday, 08 October 2009 11:13
CHICAGO/HOUSTON: Exxon Mobil Corp regained its ranking as the world’s most valuable company, overtaking PetroChina Co after Chinese price controls failed to keep pace with rising crude costs, squeezing profits on refined fuels.
State-controlled PetroChina’s Shanghai-traded shares have dropped 2.2% since Sept 2, when the Chinese government last raised domestic prices for gasoline and diesel. Exxon Mobil rose 0.7% in the same period to a market capitalisation of US$330 billion (RM1.13 trillion), compared with US$325.5 billion for PetroChina.
Irving, Texas-based Exxon Mobil, which traces it roots to the 1880s and John D Rockefeller’s Standard Oil Trust, lost the top ranking to PetroChina on May 25, after China’s stimulus plan caused a surge in stock prices. PetroChina’s 14% return on capital is less than half of Exxon Mobil’s 36%, the highest among the world’s biggest 10 oil companies by sales, according to data compiled by Bloomberg.
“Exxon is a solidly run company, one of the best managed companies out there,” said Philip Weiss, an analyst at Argus Research in New York who has a “buy” rating on Exxon Mobil shares and owns none. “It’s very conservatively run, has a good solid resource base, generally provides good returns to shareholders.”
Exxon Mobil’s annual sales are more than twice those of PetroChina. The company had US$425 billion in sales last year, or US$60.45 for every man, woman and child on the planet.
Exxon Mobil rose US$1.08, or 1.6%, to US$68.66 on Tuesday in New York Stock Exchange composite trading. PetroChina’s Shanghai shares haven’t traded since Sept 30 because of National Day holidays. The company’s Hong Kong shares climbed 2.8% to HK$9.16 (RM4.05) as of 11.24am local time yesterday.
Year to date, Exxon Mobil is still down 14%, the worst performance among seven integrated oil companies in the Standard & Poor’s 500. The company said Sept 9 that it may fail to meet its 2009 target for 2% output growth.
“My general view on Exxon is it represents a nice core holding in any portfolio that wants exposure to energy,” Weiss said. “You’re not going to get the best returns out of Exxon, but you’re not going to get the worst, either.”
Oil futures traded in New York have jumped 60% this year, heading for the biggest gain in a decade amid signs that demand for petroleum-based fuels such as gasoline is rebounding after a recession-driven collapse. China has allowed filling stations to raise gasoline and diesel prices this year by 19% and 18%, respectively.
China, which ranks behind only the US in energy consumption, on Sept 30 withdrew 37% of the fuel-price increase granted on Sept. 2.
The government has raised fuel prices four times and lowered them on three occasions this year under a system introduced in December to take into account fluctuations in the costs for oil purchased by refiners, according to the National Development and Reform Commission. The government policy allows prices to be changed when crude costs fluctuate more than 4% over 22 working days.
The Shanghai Composite Index, which jumped 87% in this year’s first seven months, has fallen 19% since then. The Dow Jones Industrial Average of 30 blue-chip US stocks, including Exxon Mobil, has risen 6.1% since the end of July. — Bloomberg
This article appeared in The Edge Financial Daily, October 8, 2009.
Tags: Exxon Mobil Corp | PetroChina Co | Ranking
Written by Joe Carroll & Edward Klump
Thursday, 08 October 2009 11:13
CHICAGO/HOUSTON: Exxon Mobil Corp regained its ranking as the world’s most valuable company, overtaking PetroChina Co after Chinese price controls failed to keep pace with rising crude costs, squeezing profits on refined fuels.
State-controlled PetroChina’s Shanghai-traded shares have dropped 2.2% since Sept 2, when the Chinese government last raised domestic prices for gasoline and diesel. Exxon Mobil rose 0.7% in the same period to a market capitalisation of US$330 billion (RM1.13 trillion), compared with US$325.5 billion for PetroChina.
Irving, Texas-based Exxon Mobil, which traces it roots to the 1880s and John D Rockefeller’s Standard Oil Trust, lost the top ranking to PetroChina on May 25, after China’s stimulus plan caused a surge in stock prices. PetroChina’s 14% return on capital is less than half of Exxon Mobil’s 36%, the highest among the world’s biggest 10 oil companies by sales, according to data compiled by Bloomberg.
“Exxon is a solidly run company, one of the best managed companies out there,” said Philip Weiss, an analyst at Argus Research in New York who has a “buy” rating on Exxon Mobil shares and owns none. “It’s very conservatively run, has a good solid resource base, generally provides good returns to shareholders.”
Exxon Mobil’s annual sales are more than twice those of PetroChina. The company had US$425 billion in sales last year, or US$60.45 for every man, woman and child on the planet.
Exxon Mobil rose US$1.08, or 1.6%, to US$68.66 on Tuesday in New York Stock Exchange composite trading. PetroChina’s Shanghai shares haven’t traded since Sept 30 because of National Day holidays. The company’s Hong Kong shares climbed 2.8% to HK$9.16 (RM4.05) as of 11.24am local time yesterday.
Year to date, Exxon Mobil is still down 14%, the worst performance among seven integrated oil companies in the Standard & Poor’s 500. The company said Sept 9 that it may fail to meet its 2009 target for 2% output growth.
“My general view on Exxon is it represents a nice core holding in any portfolio that wants exposure to energy,” Weiss said. “You’re not going to get the best returns out of Exxon, but you’re not going to get the worst, either.”
Oil futures traded in New York have jumped 60% this year, heading for the biggest gain in a decade amid signs that demand for petroleum-based fuels such as gasoline is rebounding after a recession-driven collapse. China has allowed filling stations to raise gasoline and diesel prices this year by 19% and 18%, respectively.
China, which ranks behind only the US in energy consumption, on Sept 30 withdrew 37% of the fuel-price increase granted on Sept. 2.
The government has raised fuel prices four times and lowered them on three occasions this year under a system introduced in December to take into account fluctuations in the costs for oil purchased by refiners, according to the National Development and Reform Commission. The government policy allows prices to be changed when crude costs fluctuate more than 4% over 22 working days.
The Shanghai Composite Index, which jumped 87% in this year’s first seven months, has fallen 19% since then. The Dow Jones Industrial Average of 30 blue-chip US stocks, including Exxon Mobil, has risen 6.1% since the end of July. — Bloomberg
This article appeared in The Edge Financial Daily, October 8, 2009.
Tanjong: Good bet for more gains
Tanjong: Good bet for more gains
Tags: InsiderAsia | Tanjong plc
Written by InsiderAsia
Thursday, 08 October 2009 16:10
THERE are growing concerns that the rally in global stocks has been too fast and has run ahead of underlying fundamentals. For instance, the current average price-to-earnings (P/E) valuation of roughly 17-18 times 2009 earnings for the local bourse does appear stretched.
While stock markets have remained very resilient so far, we may be in for a period of consolidation — pending more concrete evidence of a sustainable global economic recovery. That is not to say no gains can be made. But with the low-hanging fruits picked, investors would have to be more selective.
Very attractive valuations
Tanjong plc (RM15.50), we believe, is one good bet for further upside gains from hereon.
Its shares are trading at only 9.5 times our estimated earnings of 163.2 sen per share for the financial year ending January 2010 — making it one of the most attractively valued big-cap, blue-chip stocks currently listed on Bursa Malaysia.
At the same time, the stock also pays attractive dividends. We estimate dividends per share to total RM1 for the current financial year. That will earn shareholders a gross yield of 6.5% — well above prevailing bank deposit rates and the broader market's average yield.
We foresee limited earnings downside risks for the company given that Tanjong's key businesses are relatively defensive in nature.
Sustainable power earnings, upside from new acquisitions
Power is the largest earnings generator. The business accounted for about 79% of Tanjong's earnings before interest and taxes (EBIT) in 1HFY10.
Contributions from the local power assets recovered from the various one-off expenses, including major maintenance, unscheduled outages and development costs writeoffs incurred in the previous corresponding period.
Meanwhile, earnings from Tanjong's power-generating subsidiaries in Egypt and Bangladesh expanded at a steady and sustainable pace, accounting for more than half of total EBIT for the power arm. Pre-tax profit for its power-related associates was also higher at RM37 million in 1HFY10, up from RM28.4 million in 1HFY09.
We do not expect any material variation in 2HFY10. Looking further ahead, its power earnings are sustainable — with the additional upside potential from new acquisitions.
Solid NFO franchise
Luck continued to favour Tanjong's numbers totalisator business (NFO) in 2QFY10. Prize payout in the latest quarter averaged at just about 61.1%, slightly lower than the 62.5% in 1QFY10. By comparison, prize payout averaged around 65% in 1HFY09.
The lower prize payout translated into another good quarterly earnings for the company. EBIT totalled RM156.8 million in 1HFY10 compared to RM123 million in 1HFY09 — despite weaker turnover per draw, which fell by about 3.3% during the period, likely due to a combination of factors including weaker consumer spending, greater number of draws and the rise in illegal betting.
Outlook for the NFO franchise remains positive. But earnings in 2HFY10 may be lower than that in the first half of the financial year, where prize payout has averaged below the more typical 64%-65% ratio.
Good earnings from the NFO arm offset losses for its other gaming unit, the racing totalisator (RTO) business. The company is working to reduce expenses and pare losses but the unit will stay in the red in the foreseeable future.
Earnings from the power and gaming businesses are fairly steady and predictable, as are those from the property and TGV cinemas businesses. As such, the biggest concern for investors is probably Tropical Island.
Tropical Island's losses not material
The resort is likely to stay in the red until plans to develop onsite accommodation come to fruition. Those plans were delayed by the global downturn and tight credit market conditions. The first phase, to build up to 425 villas and related facilities, is now slated for completion by end-2011.
Nonetheless, losses have been pared down substantially with improved cost controls and management, as well as the successful implementation of additional facilities within the resort over the past two years.
Losses before interest and tax (LBIT) narrowed to just RM4.3 million in 1HFY10 compared to RM15.5 million in the previous corresponding period. We estimate losses in the region of RM16 million for the full year. To place that into perspective, Tropical Island's losses are marginal compared to Tanjong's estimated EBIT of RM1.26 billion in FY10.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
Tags: InsiderAsia | Tanjong plc
Written by InsiderAsia
Thursday, 08 October 2009 16:10
THERE are growing concerns that the rally in global stocks has been too fast and has run ahead of underlying fundamentals. For instance, the current average price-to-earnings (P/E) valuation of roughly 17-18 times 2009 earnings for the local bourse does appear stretched.
While stock markets have remained very resilient so far, we may be in for a period of consolidation — pending more concrete evidence of a sustainable global economic recovery. That is not to say no gains can be made. But with the low-hanging fruits picked, investors would have to be more selective.
Very attractive valuations
Tanjong plc (RM15.50), we believe, is one good bet for further upside gains from hereon.
Its shares are trading at only 9.5 times our estimated earnings of 163.2 sen per share for the financial year ending January 2010 — making it one of the most attractively valued big-cap, blue-chip stocks currently listed on Bursa Malaysia.
At the same time, the stock also pays attractive dividends. We estimate dividends per share to total RM1 for the current financial year. That will earn shareholders a gross yield of 6.5% — well above prevailing bank deposit rates and the broader market's average yield.
We foresee limited earnings downside risks for the company given that Tanjong's key businesses are relatively defensive in nature.
Sustainable power earnings, upside from new acquisitions
Power is the largest earnings generator. The business accounted for about 79% of Tanjong's earnings before interest and taxes (EBIT) in 1HFY10.
Contributions from the local power assets recovered from the various one-off expenses, including major maintenance, unscheduled outages and development costs writeoffs incurred in the previous corresponding period.
Meanwhile, earnings from Tanjong's power-generating subsidiaries in Egypt and Bangladesh expanded at a steady and sustainable pace, accounting for more than half of total EBIT for the power arm. Pre-tax profit for its power-related associates was also higher at RM37 million in 1HFY10, up from RM28.4 million in 1HFY09.
We do not expect any material variation in 2HFY10. Looking further ahead, its power earnings are sustainable — with the additional upside potential from new acquisitions.
Solid NFO franchise
Luck continued to favour Tanjong's numbers totalisator business (NFO) in 2QFY10. Prize payout in the latest quarter averaged at just about 61.1%, slightly lower than the 62.5% in 1QFY10. By comparison, prize payout averaged around 65% in 1HFY09.
The lower prize payout translated into another good quarterly earnings for the company. EBIT totalled RM156.8 million in 1HFY10 compared to RM123 million in 1HFY09 — despite weaker turnover per draw, which fell by about 3.3% during the period, likely due to a combination of factors including weaker consumer spending, greater number of draws and the rise in illegal betting.
Outlook for the NFO franchise remains positive. But earnings in 2HFY10 may be lower than that in the first half of the financial year, where prize payout has averaged below the more typical 64%-65% ratio.
Good earnings from the NFO arm offset losses for its other gaming unit, the racing totalisator (RTO) business. The company is working to reduce expenses and pare losses but the unit will stay in the red in the foreseeable future.
Earnings from the power and gaming businesses are fairly steady and predictable, as are those from the property and TGV cinemas businesses. As such, the biggest concern for investors is probably Tropical Island.
Tropical Island's losses not material
The resort is likely to stay in the red until plans to develop onsite accommodation come to fruition. Those plans were delayed by the global downturn and tight credit market conditions. The first phase, to build up to 425 villas and related facilities, is now slated for completion by end-2011.
Nonetheless, losses have been pared down substantially with improved cost controls and management, as well as the successful implementation of additional facilities within the resort over the past two years.
Losses before interest and tax (LBIT) narrowed to just RM4.3 million in 1HFY10 compared to RM15.5 million in the previous corresponding period. We estimate losses in the region of RM16 million for the full year. To place that into perspective, Tropical Island's losses are marginal compared to Tanjong's estimated EBIT of RM1.26 billion in FY10.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
Public Bank an outperform, says Inter-Pacific Research
Public Bank an outperform, says Inter-Pacific Research
Tags: PBB
Written by Surin Murugiah
Friday, 09 October 2009 08:43
Inter-Pacific Research Sdn Bhd is recommending PUBLIC BANK BHD [] (PBB) as an outperform at RM10.40 with target price RM11.80, and said the bank's loans growth of 15% for FY09 seemed achievable.
The research house said on the back of high loans approval, up 17% year-on-year (y-o-y) to RM24.5 billion in 1HFY09, it expects PBB's full year loans to expand by 15% y-o-y from 19.2% y-o-y in FY08.
It said non-performing loans (NPLs) were expected to creep up slightly in 2HFY09 from loan defaults as PBB's organic loans that accounts for two-third of their total loans would be affected from the first two quarters of 2009 real gross domestic product (GDP) contraction.
"We project gross and net NPLs to be at 1.02% and 0.9% respectively in FY09, from 1.01% and 0.86% respectively in FY08," it said.
Inter-Pacific Research said PBB's net interest margin (NIM) would be compressed by 20-25 basis points in FY09 from the after effects of 150 basis points cut in Overnight Policy Rate (OPR) to 2% by Bank Negara.
But the drop in margins was compensated from the increase in hire purchase rates and corporate loans in March 2009, it said.
On the bank earnings, it said bottomline was projected to shrink by 13.1% in FY09 following compressed NIM and higher interest cost from raising RM1 billion of Non-Innovative Tier 1 Capital.
"But the bottomline should rebound by 9.5% in FY10 from stronger loans growth, lower credit charge off rate and higher contribution from non-interest income," it said.
Tags: PBB
Written by Surin Murugiah
Friday, 09 October 2009 08:43
Inter-Pacific Research Sdn Bhd is recommending PUBLIC BANK BHD [] (PBB) as an outperform at RM10.40 with target price RM11.80, and said the bank's loans growth of 15% for FY09 seemed achievable.
The research house said on the back of high loans approval, up 17% year-on-year (y-o-y) to RM24.5 billion in 1HFY09, it expects PBB's full year loans to expand by 15% y-o-y from 19.2% y-o-y in FY08.
It said non-performing loans (NPLs) were expected to creep up slightly in 2HFY09 from loan defaults as PBB's organic loans that accounts for two-third of their total loans would be affected from the first two quarters of 2009 real gross domestic product (GDP) contraction.
"We project gross and net NPLs to be at 1.02% and 0.9% respectively in FY09, from 1.01% and 0.86% respectively in FY08," it said.
Inter-Pacific Research said PBB's net interest margin (NIM) would be compressed by 20-25 basis points in FY09 from the after effects of 150 basis points cut in Overnight Policy Rate (OPR) to 2% by Bank Negara.
But the drop in margins was compensated from the increase in hire purchase rates and corporate loans in March 2009, it said.
On the bank earnings, it said bottomline was projected to shrink by 13.1% in FY09 following compressed NIM and higher interest cost from raising RM1 billion of Non-Innovative Tier 1 Capital.
"But the bottomline should rebound by 9.5% in FY10 from stronger loans growth, lower credit charge off rate and higher contribution from non-interest income," it said.
QSR hits 52-week high of RM3.64
QSR hits 52-week high of RM3.64
Tags: 52-week high | QSR Brands Bhd
Written by Yong Min Wei
Friday, 09 October 2009 11:04
KUALA LUMPUR: QSR BRANDS BHD [] hit a fresh 52-week high of RM3.64 yesterday, as buying interest in the food and beverage (F&B) retail group continues, premised on the defensive nature of its businesses.
The counter rose to an intra-day high of RM3.72 before closing at RM3.64, with 225,100 shares done. A check with Bloomberg data showed that QSR has been rising daily since the beginning of this week from its close of RM3.25 last Friday.
In a research report yesterday, CIMB Research reiterated its outperform call on the stock, its top pick in the F&B sector, with a target price of RM5.94 from RM5.30.
CIMB said its revised price target yielded a 61% upside, as the research house rolled over its valuation horizon to calendar year 2011.
“QSR remains an attractive growth story with a three-year earnings per share compounded annual growth rate of 11.9%,” it said.
The research house said QSR offered a cheaper entry into the KFC business with the added attraction of the growing Pizza Hut business and higher dividend yields.
QSR owns 50.25% of KFC Holdings Bhd (KFCH), which runs both the KFC and Pizza Hut dine-in and fast-food restaurant chain in the country and overseas, including Singapore and Cambodia. CIMB said QSR commanded 70% of the country’s pizza market and 11% of the Western quick-service restaurant.
“But, investors are paying an undeservedly low price earnings of 3.2 times for the Pizza Hut business when it deserves to trade at a premium given its growth potential,” it said. CIMB added that QSR might open its first KFC outlet in India by year-end.
Under a deal with the global Yum! Group, KFCH would invest US$5 million (RM17 million) in Mumbai and US$1 million in Pune, with the target of opening 10 KFC outlets in Mumbai and two in Pune, with one slated for opening in Mumbai by year-end, it said. CIMB added that the Indian outlets were expected to be profitable in three years.
“KFCH’s entry into India is expected to provide the company with an opportunity to diversify its earnings base and reduce its dependence on Malaysia and Singapore.
“We understand that there are four existing KFC outlets in Mumbai, operated by three franchise holders which have done little to grow the franchise.
There are only about 40 KFC outlets in India while there are 35 McDonald’s outlets in Mumbai alone,” CIMB said. Meanwhile, QSR’s expansion in Cambodia was on track, with its Pizza Hut operations set to break even next year, the research house said.
This article appeared in The Edge Financial Daily, October 9, 2009.
Tags: 52-week high | QSR Brands Bhd
Written by Yong Min Wei
Friday, 09 October 2009 11:04
KUALA LUMPUR: QSR BRANDS BHD [] hit a fresh 52-week high of RM3.64 yesterday, as buying interest in the food and beverage (F&B) retail group continues, premised on the defensive nature of its businesses.
The counter rose to an intra-day high of RM3.72 before closing at RM3.64, with 225,100 shares done. A check with Bloomberg data showed that QSR has been rising daily since the beginning of this week from its close of RM3.25 last Friday.
In a research report yesterday, CIMB Research reiterated its outperform call on the stock, its top pick in the F&B sector, with a target price of RM5.94 from RM5.30.
CIMB said its revised price target yielded a 61% upside, as the research house rolled over its valuation horizon to calendar year 2011.
“QSR remains an attractive growth story with a three-year earnings per share compounded annual growth rate of 11.9%,” it said.
The research house said QSR offered a cheaper entry into the KFC business with the added attraction of the growing Pizza Hut business and higher dividend yields.
QSR owns 50.25% of KFC Holdings Bhd (KFCH), which runs both the KFC and Pizza Hut dine-in and fast-food restaurant chain in the country and overseas, including Singapore and Cambodia. CIMB said QSR commanded 70% of the country’s pizza market and 11% of the Western quick-service restaurant.
“But, investors are paying an undeservedly low price earnings of 3.2 times for the Pizza Hut business when it deserves to trade at a premium given its growth potential,” it said. CIMB added that QSR might open its first KFC outlet in India by year-end.
Under a deal with the global Yum! Group, KFCH would invest US$5 million (RM17 million) in Mumbai and US$1 million in Pune, with the target of opening 10 KFC outlets in Mumbai and two in Pune, with one slated for opening in Mumbai by year-end, it said. CIMB added that the Indian outlets were expected to be profitable in three years.
“KFCH’s entry into India is expected to provide the company with an opportunity to diversify its earnings base and reduce its dependence on Malaysia and Singapore.
“We understand that there are four existing KFC outlets in Mumbai, operated by three franchise holders which have done little to grow the franchise.
There are only about 40 KFC outlets in India while there are 35 McDonald’s outlets in Mumbai alone,” CIMB said. Meanwhile, QSR’s expansion in Cambodia was on track, with its Pizza Hut operations set to break even next year, the research house said.
This article appeared in The Edge Financial Daily, October 9, 2009.
LPI 3Q net profit up 25%
LPI 3Q net profit up 25%
Tags: LPI Capital Bhd | third quarter
Written by Financial Daily
Friday, 09 October 2009 10:50
KUALA LUMPUR: LPI CAPITAL BHD []’s net profit for the third quarter (3Q) ended Sept 30, 2009 jumped 25% to RM32.9 million from RM26.24 million a year earlier due to higher underwriting profit.
Revenue rose 7.8% year-on-year to RM206.63 million from RM191.73 million previously. Earnings per share rose to 23.9 sen from 19.06 sen.
For the cumulative nine-month period, LPI posted a net profit of RM91.12 million on a turnover of RM583.88 million, an annual increase of 27% and 12% respectively. It said this was mainly from higher gross premium underwritten. To-date, it has proposed dividend of 26.25 sen, 4.05 sen higher than the previous corresponding period.
This article appeared in The Edge Financial Daily, October 9, 2009.
Tags: LPI Capital Bhd | third quarter
Written by Financial Daily
Friday, 09 October 2009 10:50
KUALA LUMPUR: LPI CAPITAL BHD []’s net profit for the third quarter (3Q) ended Sept 30, 2009 jumped 25% to RM32.9 million from RM26.24 million a year earlier due to higher underwriting profit.
Revenue rose 7.8% year-on-year to RM206.63 million from RM191.73 million previously. Earnings per share rose to 23.9 sen from 19.06 sen.
For the cumulative nine-month period, LPI posted a net profit of RM91.12 million on a turnover of RM583.88 million, an annual increase of 27% and 12% respectively. It said this was mainly from higher gross premium underwritten. To-date, it has proposed dividend of 26.25 sen, 4.05 sen higher than the previous corresponding period.
This article appeared in The Edge Financial Daily, October 9, 2009.
UMW shares trading at rich valuations
UMW shares trading at rich valuations
Tags: Brokers Call | OSK Research | UMW
Written by Financial Daily
Friday, 09 October 2009 10:39
OSK Research Sdn Bhd has raised its fair value for UMW HOLDINGS BHD [] shares by 12% in anticipation of better performance at the diversified firm’s automotive, and oil and gas (O&G) units.
The upward revision in UMW’s share price was despite OSK reiterating its sell call for the stock whose valuations are deemed more expensive compared to its peers. UMW shares are also overvalued compared to its net tangible assets (NTA) or book value, according to the research firm.
“Pending further developments from its oil and gas division, we continue to retain our earnings estimates at this juncture,” OSK wrote in a note.
UMW shares are deemed fairly valued at RM5.27, compared with the earlier forecast of RM4.27.
The higher target price for UMW is derived from a higher price-to-earnings ratio (PER) estimates for the automotive and oil and gas divisions. This is in anticipation of UMW, the franchise holder for Toyota vehicles in Malaysia, selling more cars next year.
Meanwhile, the O&G unit is expected to do better on expectation that its earnings would be helped by incoming contracts from oil majors as crude oil demand recovers.
At a PER of 23 times financial year (FY) 2009 earnings, and 16 times FY10 earnings, UMW’s share valuations are deemed costlier than its peers which are trading at 13 times and 10 times, respectively.
“The counter has consistently traded at a premium of 50% to 80% against the auto sector PER, partly due to the oil and gas play since 2007,” OSK said.
UMW’s O&G arm UMW Oil & Gas Bhd will be closely watched as it is expected to seek listing on the Malaysian bourse soon. Its planned flotation, originally scheduled for the third quarter of last year, was postponed twice due to unfavourable market conditions.
The exercise was expected to raise about RM425 million. Following the expiry of authorities’ approval for the initial listing proposal, UMW is now considering submitting a new flotation plan to the Securities Commission.
The proposal has to be revised because the number of operating units under UMW Oil & Gas is expected to more than double to 30 from 14 entities under the original arrangement.
With more operating units on board, UMW Oil & Gas is expected to seek a better value for its initial public offering (IPO).
UMW was traded unchanged at RM6.40 yesterday.
This article appeared in The Edge Financial Daily, October 9, 2009.
Tags: Brokers Call | OSK Research | UMW
Written by Financial Daily
Friday, 09 October 2009 10:39
OSK Research Sdn Bhd has raised its fair value for UMW HOLDINGS BHD [] shares by 12% in anticipation of better performance at the diversified firm’s automotive, and oil and gas (O&G) units.
The upward revision in UMW’s share price was despite OSK reiterating its sell call for the stock whose valuations are deemed more expensive compared to its peers. UMW shares are also overvalued compared to its net tangible assets (NTA) or book value, according to the research firm.
“Pending further developments from its oil and gas division, we continue to retain our earnings estimates at this juncture,” OSK wrote in a note.
UMW shares are deemed fairly valued at RM5.27, compared with the earlier forecast of RM4.27.
The higher target price for UMW is derived from a higher price-to-earnings ratio (PER) estimates for the automotive and oil and gas divisions. This is in anticipation of UMW, the franchise holder for Toyota vehicles in Malaysia, selling more cars next year.
Meanwhile, the O&G unit is expected to do better on expectation that its earnings would be helped by incoming contracts from oil majors as crude oil demand recovers.
At a PER of 23 times financial year (FY) 2009 earnings, and 16 times FY10 earnings, UMW’s share valuations are deemed costlier than its peers which are trading at 13 times and 10 times, respectively.
“The counter has consistently traded at a premium of 50% to 80% against the auto sector PER, partly due to the oil and gas play since 2007,” OSK said.
UMW’s O&G arm UMW Oil & Gas Bhd will be closely watched as it is expected to seek listing on the Malaysian bourse soon. Its planned flotation, originally scheduled for the third quarter of last year, was postponed twice due to unfavourable market conditions.
The exercise was expected to raise about RM425 million. Following the expiry of authorities’ approval for the initial listing proposal, UMW is now considering submitting a new flotation plan to the Securities Commission.
The proposal has to be revised because the number of operating units under UMW Oil & Gas is expected to more than double to 30 from 14 entities under the original arrangement.
With more operating units on board, UMW Oil & Gas is expected to seek a better value for its initial public offering (IPO).
UMW was traded unchanged at RM6.40 yesterday.
This article appeared in The Edge Financial Daily, October 9, 2009.
Jim Rogers predicts that commodities boom could last 20 years
Jim Rogers predicts that commodities boom could last 20 years
Jim Rogers, the bullish commodities investor, has predicted that demand for raw materials will outstrip supply for the next two decades, fuelling an extended boom.
By Rowena Mason
Published: 11:07PM BST 08 Oct 2009
Jim Rogers predicts that commodities boom could last 20 years. The chairman of Rogers Holdings, based in Singapore, believes the weakness of the dollar will underpin a flight towards commodities.
"I don't see any adequate supply situation in any commodity market over the next decade or two," he said. "The commodities boom is not over and the bull market has several years to go.
"Commodities are the best place to be, if you ask me, based on supply and demand."
Oil could reach between $150 and $200 per barrel, as known reserves begin to decline.
Mr Rogers believes that "unless something happens", crude oil will run out in 15 to 20 years. Although plenty of large oil discoveries have been made lately, the commodity is increasingly hard to extract from the ground.
"The supply of everything continues to decline," Mr Rogers said.
"If the world economy recovers, commodities will do the best, because supply is being restricted. If the world economy does not recover, commodities will still be the best place to be, because governments are printing huge amounts of money."
Mr Rogers, the author of Adventure Capitalist and Investment Biker, said he has not invested in equities apart from in China for the last two years.
He first staked his reputation on announcing the start of a global commodities rally in 1999. The cost of raw materials has risen around 36pc over the last decade.
His comments came as Alcoa, the US aluminium producer, posted surprise profits, boosting mining stock on both the New York and London exchanges.
The company forecast an 11pc increase in demand during the second half, almost entirely fuelled by China.
Global stockpiles of commodities monitored by the London Metal Exchange have surged this year on lower industrial demand during the recession, but analysts believe the market may now be stabilising.
Oil prices broke the $70 mark in the US, rising $2.12 to $71.69 a barrel, while Brent crude climbed $2.50 to $70.54 in London, supported by the weak dollar.
http://www.telegraph.co.uk/finance/newsbysector/industry/6276453/Jim-Rogers-predicts-that-commodities-boom-could-last-20-years.html
Jim Rogers, the bullish commodities investor, has predicted that demand for raw materials will outstrip supply for the next two decades, fuelling an extended boom.
By Rowena Mason
Published: 11:07PM BST 08 Oct 2009
Jim Rogers predicts that commodities boom could last 20 years. The chairman of Rogers Holdings, based in Singapore, believes the weakness of the dollar will underpin a flight towards commodities.
"I don't see any adequate supply situation in any commodity market over the next decade or two," he said. "The commodities boom is not over and the bull market has several years to go.
"Commodities are the best place to be, if you ask me, based on supply and demand."
Oil could reach between $150 and $200 per barrel, as known reserves begin to decline.
Mr Rogers believes that "unless something happens", crude oil will run out in 15 to 20 years. Although plenty of large oil discoveries have been made lately, the commodity is increasingly hard to extract from the ground.
"The supply of everything continues to decline," Mr Rogers said.
"If the world economy recovers, commodities will do the best, because supply is being restricted. If the world economy does not recover, commodities will still be the best place to be, because governments are printing huge amounts of money."
Mr Rogers, the author of Adventure Capitalist and Investment Biker, said he has not invested in equities apart from in China for the last two years.
He first staked his reputation on announcing the start of a global commodities rally in 1999. The cost of raw materials has risen around 36pc over the last decade.
His comments came as Alcoa, the US aluminium producer, posted surprise profits, boosting mining stock on both the New York and London exchanges.
The company forecast an 11pc increase in demand during the second half, almost entirely fuelled by China.
Global stockpiles of commodities monitored by the London Metal Exchange have surged this year on lower industrial demand during the recession, but analysts believe the market may now be stabilising.
Oil prices broke the $70 mark in the US, rising $2.12 to $71.69 a barrel, while Brent crude climbed $2.50 to $70.54 in London, supported by the weak dollar.
http://www.telegraph.co.uk/finance/newsbysector/industry/6276453/Jim-Rogers-predicts-that-commodities-boom-could-last-20-years.html
Investors should ignore the economic indicators
Diary of a private investor: investors should ignore the economic indicators
While Enterprise Inns shares have risen mightily from their lows, they are still less than two fifths of the net asset value and, good heavens, the company makes profits.
By James Bartholomew
Published: 12:19PM BST 07 Oct 2009
How do the words of that old Brenda Lee song go? Something like, "Here comes that feeling again, and it ain't right!" That was certainly my experience at the end of last week if you take "ain't right" to mean "ain't pleasant".
Markets around the world started falling in a manner horribly reminiscent of a year ago. It is amazing, incidentally, how world markets move together these days. They are like synchronised swimmers diving together, rising up in unison and twiddling their feet in the air all together.
Anyway my shares went down. I lost money – lots of it. I say this with emphasis for a friend who – to my surprise – turns out to be a reader of this column. I asked him, "which Diaries do you like best then, the ones when I tell of my successes or my flops?" He unhesitatingly opted for the latter. So this is for you, David.
Enterprise Inns fell from 135p to 123p between the opening on that Tuesday and the close on Thursday. A different friend emailed me a gloomy broker's report on the company's bonds. This downer written by a close relation of Eeyore may have played a part in the fall of the stock. Enterprise Inns, by the way, was up at 180p at the beginning of September.
So the shares have fallen 32 per cent since then. I had a quite a fair amount of cash invested in it, too. So that is plenty of money that has vanished. I am afraid though, David, that I am still just about in profit overall but my purchase this summer at a price of 167p looks pretty silly.
The report of doom was by JPMorgan. It dwelt on the pubs that had been closed, the ones that had been sold at prices which the broker thought discouraging and the review by the Office for Fair Trading which will come out later this month concerning whether or not it is fair that the pub tenants of Enterprise Inns have to buy beer supplied by the company.
As if that were not enough, he went on about the still weighty overhang of debt and the possibility of a rights issue. After reading that lot, I felt I might as well write the whole investment off and cancel my next holiday.
But something in me – probably the fact of being long of the stock – revolted. I wrote back to my friend who kindly supplied the research: "Hang on a minute. Aren't we in danger of forgetting the main point?" The main point is that Enterprise Inns is not going bust.
Whether it has a rights issue or not, Enterprise Inns is not a dead parrot. It is not extinct. It still moves and squawks. It may not be pretty but it is going to survive. For some nervous weeks earlier this year the shares were valued as though it had no future. Now it has.
And while the shares have risen mightily from their lows, they are still less than two fifths of the net asset value and, good heavens, the company makes profits. In fact it is valued at a mere four times the consensus forecast earnings. The shares still have great potential. The day after I wrote this robust case, the shares fell 6p. Incidentally, I have also lost money recently in Barratt Developments and Harvey Nash.
What about the market as a whole? It is October – a nerve-racking time and everyone remembers how bad it was last year. Perhaps precisely because investors are nervous of this month they might have held back from purchases in September and the market might survive without too much damage.
But frankly there is not much point in trying to guess stock market movements over a few weeks.
The recent falls have been ascribed by some commentators to disappointment with some figures coming from the real economy. I don't believe that.
Those of us with experience going back to Brenda Lee's glory days have learned that the stock market does not swim synchronously with the real economy. Real activity is down in the depths struggling for air but that will not stop the stock market breaching the surface. A bull market started in 1974 when the economy had quite a few more years of misery to endure.
The key things to watch, I believe are low interest rates and quantitative easing. As long as these continue, so will the bull market.
http://www.telegraph.co.uk/finance/personalfinance/investing/6267833/Diary-of-a-private-investor-Investors-should-ignore-the-economic-indicators.html
While Enterprise Inns shares have risen mightily from their lows, they are still less than two fifths of the net asset value and, good heavens, the company makes profits.
By James Bartholomew
Published: 12:19PM BST 07 Oct 2009
How do the words of that old Brenda Lee song go? Something like, "Here comes that feeling again, and it ain't right!" That was certainly my experience at the end of last week if you take "ain't right" to mean "ain't pleasant".
Markets around the world started falling in a manner horribly reminiscent of a year ago. It is amazing, incidentally, how world markets move together these days. They are like synchronised swimmers diving together, rising up in unison and twiddling their feet in the air all together.
Anyway my shares went down. I lost money – lots of it. I say this with emphasis for a friend who – to my surprise – turns out to be a reader of this column. I asked him, "which Diaries do you like best then, the ones when I tell of my successes or my flops?" He unhesitatingly opted for the latter. So this is for you, David.
Enterprise Inns fell from 135p to 123p between the opening on that Tuesday and the close on Thursday. A different friend emailed me a gloomy broker's report on the company's bonds. This downer written by a close relation of Eeyore may have played a part in the fall of the stock. Enterprise Inns, by the way, was up at 180p at the beginning of September.
So the shares have fallen 32 per cent since then. I had a quite a fair amount of cash invested in it, too. So that is plenty of money that has vanished. I am afraid though, David, that I am still just about in profit overall but my purchase this summer at a price of 167p looks pretty silly.
The report of doom was by JPMorgan. It dwelt on the pubs that had been closed, the ones that had been sold at prices which the broker thought discouraging and the review by the Office for Fair Trading which will come out later this month concerning whether or not it is fair that the pub tenants of Enterprise Inns have to buy beer supplied by the company.
As if that were not enough, he went on about the still weighty overhang of debt and the possibility of a rights issue. After reading that lot, I felt I might as well write the whole investment off and cancel my next holiday.
But something in me – probably the fact of being long of the stock – revolted. I wrote back to my friend who kindly supplied the research: "Hang on a minute. Aren't we in danger of forgetting the main point?" The main point is that Enterprise Inns is not going bust.
Whether it has a rights issue or not, Enterprise Inns is not a dead parrot. It is not extinct. It still moves and squawks. It may not be pretty but it is going to survive. For some nervous weeks earlier this year the shares were valued as though it had no future. Now it has.
And while the shares have risen mightily from their lows, they are still less than two fifths of the net asset value and, good heavens, the company makes profits. In fact it is valued at a mere four times the consensus forecast earnings. The shares still have great potential. The day after I wrote this robust case, the shares fell 6p. Incidentally, I have also lost money recently in Barratt Developments and Harvey Nash.
What about the market as a whole? It is October – a nerve-racking time and everyone remembers how bad it was last year. Perhaps precisely because investors are nervous of this month they might have held back from purchases in September and the market might survive without too much damage.
But frankly there is not much point in trying to guess stock market movements over a few weeks.
The recent falls have been ascribed by some commentators to disappointment with some figures coming from the real economy. I don't believe that.
Those of us with experience going back to Brenda Lee's glory days have learned that the stock market does not swim synchronously with the real economy. Real activity is down in the depths struggling for air but that will not stop the stock market breaching the surface. A bull market started in 1974 when the economy had quite a few more years of misery to endure.
The key things to watch, I believe are low interest rates and quantitative easing. As long as these continue, so will the bull market.
http://www.telegraph.co.uk/finance/personalfinance/investing/6267833/Diary-of-a-private-investor-Investors-should-ignore-the-economic-indicators.html
Saturday 10 October 2009
Would you put your pension on a politician's promise?
Would you put your pension on a politician's promise?
Britain’s state pensions are Ponzi schemes on a scale to make the fraudster Bernard Madoff blush.
By Ian Cowie
Published: 12:17PM BST 09 Oct 2009
Comments 1 | Comment on this article
"Told you so. Sorry to start so smugly, but there really is no other way to put it. This column has often warned about the risks of savers putting their faith in politicians’ promises. Now this week’s Pensions White Paper demonstrates just how dangerous that can be in cash terms.”
That’s what I said in this space on May 27 2006, the last time millions of people’s retirement plans took a knock when politicians moved the goalposts. Back then, it was the announcement that Labour planned to scrap the earnings-related benefits of the State Second Pension, just four years after S2P had replaced the State Earnings Related Pension Scheme (Serps). This week it was the Conservative proposal to make 5.4m people work longer before they can claim state pensions of any description.
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Millions to work a year longer under Tories So this would be a good moment to set out some sad but important facts. Britain’s state pensions are Ponzi schemes on a scale that would make the fraudster Bernard Madoff blush. This week’s National Insurance Contributions (NICs), deducted from workers’ salaries, are used to pay next week’s state pensions. That kind of accounting is called fraud in the private sector – as Mr Madoff can attest – and no insurance company would be allowed to carry on in this way.
The reason is that all Ponzi schemes collapse, sooner or later, when the inflow of money from new mugs proves insufficient to honour promises issued earlier and too many people ask to be paid. That is what is happening now with Britain’s state pensions.
Nobody should be surprised. As regular readers will know, this is the point in the article where I like to quote Nye Bevan – a founder of the welfare state – who disclosed more than 50 years ago: “The great secret about the National Insurance fund is that there ain’t no fund.”
To be fair to politicians of all parties, the chart on this page shows why state pension ages must rise – even if the scheme had been properly funded. Figures from the Office for National Statistics (ONS) demonstrate that men and women are living for more than a decade longer than they did when the current retirement ages came into effect with the National Insurance Act 1946.
Looking even further back, you can see that average life expectancy has nearly doubled since Edward VII was born and the ONS stats series started in 1841. Only in the wacky world of life assurance and pensions could this remarkable improvement be regarded as a problem.
From a historical perspective, this week’s Tory proposal could even be seen as “going back to the future” because, when the Basic State Pension was introduced in 1908, the retirement age was set at 70.
Here and now, I would suggest that anybody aged under 30 today would be rash to expect to receive any state pension before they reach 70 years of age. Certainly, the proposed increase to 66 will not be the last time this carrot is shifted a little further away from the donkey’s nose.
Nor do we have to look too far into the future to see this happening. For example, from next April the NICs deducted from our salaries will cease to buy increased S2P benefits, as flagged up in this space three years ago. Thank heavens about 600,000 people contracted out of Serps and S2P to have their NICs paid into private pensions, ignoring all the actuaries’ warnings since then that we should opt back into the state scheme.
Any of us aged over 50 now can take a quarter of these contracted out pensions as tax-free cash any time we please – but it is important to beware that this threshold will be raised to 55 next April.
When I opted out of Serps more than 20 years ago, I did so on the basis that I would rather build up a pot of private property than rely on an ill-defined share of an unfunded scheme. That remains as true now as it was then.
Put another way, which would you rather have: a tax-free lump sum today or a politician’s promise tomorrow?
Pensions are not the only way
More than 2m people are thought to be older than 50 now but younger than 55 next April. We face a ticklish question that affects all our pension savings, whether they are in private sector plans, Serps or S2P. If we fail to draw tax-free cash before April 6, 2010, these funds will be locked up until we reach 55 years age – always assuming the politicians don’t move the goalposts again.
That postponement could prove very awkward if, for example, you lost your job in the meantime. And, let’s face it, there can’t be many people who are absolutely certain what they will be doing three or four years hence. So it is tantalising to know that a substantial sum of tax-free cash is available now, when you might not need it, but won’t be available in future, when you might.
The good news is that this week’s increase in individual savings account (Isa) allowances for people aged over 50 has the unintended consequence of helping us to avoid this potential cash flow crisis. The maximum was raised on October 6 to £10,200 per tax year, per person – strictly speaking, anyone who will be aged over 50 in April next year.
So a married couple who are both the right age and have not used their current Isa allowance could place up to £40,800 in the Isa tax shelter between now and April 6 2010, when the next fiscal year starts.
This provides some valuable wriggle room for people who might want to draw benefits from their pension savings while they still can, even if they have no immediate need of the cash. The improved Isa limits mean they can continue to keep the money invested in real assets – such as shares, bonds and unit or investment trusts – in the hope of preserving its purchasing power for when they actually need it.
Better still, unlike pensions, there is no need to pay tax on income received from Isas; nor any need to declare Isas in your tax returns. It also goes to show that pensions are not the only way to provide for retirement.
http://www.telegraph.co.uk/finance/personalfinance/comment/iancowie/6274049/Would-you-put-your-pension-on-a-politicians-promise.html
Buffett Selling Means You Shouldn’t Be Buying
Buffett Selling Means You Shouldn’t Be Buying
Commentary by Jonathan Weil
Oct. 8 (Bloomberg) -- It’s not often that Warren Buffett gives the investing public a reason to believe he’s not on their side.
Then again, it’s not every day that Buffett’s Berkshire Hathaway Inc. shows up on the list of selling shareholders in another company’s initial public offering.
This brings us to today’s question: If Buffett is a seller, should you be a buyer? Probably not. This is the same fellow, after all, who is famous for saying that the best time to sell a stock is never.
The possible IPO comes from Symetra Financial Corp., a life-insurance carrier based in Bellevue, Washington. Berkshire began accumulating its 26 percent stake in Symetra in 2004, when a group led by Berkshire and White Mountains Insurance Group Ltd. bought the business for $1.4 billion from the insurance company Safeco Corp.
Symetra filed this week to raise as much as $575 million from new shareholders and said it intends to use its portion of the proceeds for general purposes, which may include fresh capital for its insurance subsidiaries. Naturally, if this is such a good investment opportunity, you might think Buffett would be increasing Berkshire’s stake in the company. He’s not.
Symetra didn’t disclose how many shares Berkshire and White Mountains may sell, though it did say they would continue to own some after the IPO, assuming it goes through. It’s also possible they could decide not to sell any, even though the company’s prospectus identifies them as “selling stockholders.”
Slick Math
When I looked through Symetra’s registration statement -- which is 1,000 pages long, including exhibits -- what struck me was the slickness of its numbers. The first financial metric Symetra touted on the opening page of its prospectus was something it called adjusted book value, which was $1.4 billion as of June 30. That figure turns out to be a lot of hot air.
Symetra’s actual book value, or shareholder equity, was $763.7 million. The company arrived at the $1.4 billion by adding back $642.9 million of pent-up losses, mainly from investments, and acting as if they don’t matter. That’s no small detail. Symetra’s equity looks thin at 3.6 percent of the company’s $21.1 billion of assets. Berkshire’s equity, by comparison, is equivalent to 43 percent of assets.
Additionally, Symetra’s prospectus said the company’s “internal control over financial reporting does not currently meet the standards” required by federal law for publicly traded companies. That’s quite a disclosure, considering Symetra was a unit of a large public company as recently as 2004. It tells you there’s a chance that Symetra’s financial statements might not be reliable.
Mining for Fees
As for the business itself, Symetra’s owners have operated a lot like private-equity deal whizzes, extracting large sums of cash through dividends and fees.
For 2006, Symetra reported net income of $159.5 million and paid $100 million of dividends. In 2007, when net income was $167.3 million, Symetra paid its shareholders $200 million of dividends -- which it financed in part by issuing $150 million of new debt. Perhaps if Symetra hadn’t paid such large dividends before, it wouldn’t need money from the public markets now.
The company hasn’t paid dividends since 2007. Net income fell to $22.1 million in 2008, driven by investment losses, before rebounding to $52.1 million during the first six months of 2009. This year’s earnings come with a caveat, though.
Help From FASB
Symetra’s pretax profit would have been 92 percent less were it not for rule changes by the Financial Accounting Standards Board last spring. That’s when the FASB caved to pressure by Congress and rushed to expand the range of investment losses that banks and insurance companies can exclude from their reported earnings, even when they conclude the losses aren’t temporary.
Additionally, White Mountains collects fees for managing Symetra’s investments -- $57 million in all since the start of 2006. For example, when White Mountains invests Symetra’s money in a hedge fund or in corporate equities, it gets an annual fee equivalent to 1 percent of the investment’s value.
White Mountains’ $14.6 million of fees last year exceeded Symetra’s $13 million of pretax income. Nice work if you can get it. (Symetra’s net income was greater than pretax profit because of a large deferred-tax benefit.) Like Berkshire, White Mountains has a 26 percent stake in Symetra. Berkshire also had been White Mountains’ second-biggest shareholder until it sold its stake back to the company last year.
We can’t blame Buffett for wanting to sell some of his company’s Symetra shares, which amount to a tiny fraction of Berkshire’s $275 billion of assets. Berkshire’s shareholders should be pleased if he can. Symetra also filed to go public in 2007, only to cancel the offering when the IPO market dried up.
You have to wonder, though, why anyone would want to be on the other side of this trade.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net
Last Updated: October 7, 2009 21:00 EDT
http://www.bloomberg.com/apps/news?pid=20601039&sid=ah5Yse3JbqFI
Commentary by Jonathan Weil
Oct. 8 (Bloomberg) -- It’s not often that Warren Buffett gives the investing public a reason to believe he’s not on their side.
Then again, it’s not every day that Buffett’s Berkshire Hathaway Inc. shows up on the list of selling shareholders in another company’s initial public offering.
This brings us to today’s question: If Buffett is a seller, should you be a buyer? Probably not. This is the same fellow, after all, who is famous for saying that the best time to sell a stock is never.
The possible IPO comes from Symetra Financial Corp., a life-insurance carrier based in Bellevue, Washington. Berkshire began accumulating its 26 percent stake in Symetra in 2004, when a group led by Berkshire and White Mountains Insurance Group Ltd. bought the business for $1.4 billion from the insurance company Safeco Corp.
Symetra filed this week to raise as much as $575 million from new shareholders and said it intends to use its portion of the proceeds for general purposes, which may include fresh capital for its insurance subsidiaries. Naturally, if this is such a good investment opportunity, you might think Buffett would be increasing Berkshire’s stake in the company. He’s not.
Symetra didn’t disclose how many shares Berkshire and White Mountains may sell, though it did say they would continue to own some after the IPO, assuming it goes through. It’s also possible they could decide not to sell any, even though the company’s prospectus identifies them as “selling stockholders.”
Slick Math
When I looked through Symetra’s registration statement -- which is 1,000 pages long, including exhibits -- what struck me was the slickness of its numbers. The first financial metric Symetra touted on the opening page of its prospectus was something it called adjusted book value, which was $1.4 billion as of June 30. That figure turns out to be a lot of hot air.
Symetra’s actual book value, or shareholder equity, was $763.7 million. The company arrived at the $1.4 billion by adding back $642.9 million of pent-up losses, mainly from investments, and acting as if they don’t matter. That’s no small detail. Symetra’s equity looks thin at 3.6 percent of the company’s $21.1 billion of assets. Berkshire’s equity, by comparison, is equivalent to 43 percent of assets.
Additionally, Symetra’s prospectus said the company’s “internal control over financial reporting does not currently meet the standards” required by federal law for publicly traded companies. That’s quite a disclosure, considering Symetra was a unit of a large public company as recently as 2004. It tells you there’s a chance that Symetra’s financial statements might not be reliable.
Mining for Fees
As for the business itself, Symetra’s owners have operated a lot like private-equity deal whizzes, extracting large sums of cash through dividends and fees.
For 2006, Symetra reported net income of $159.5 million and paid $100 million of dividends. In 2007, when net income was $167.3 million, Symetra paid its shareholders $200 million of dividends -- which it financed in part by issuing $150 million of new debt. Perhaps if Symetra hadn’t paid such large dividends before, it wouldn’t need money from the public markets now.
The company hasn’t paid dividends since 2007. Net income fell to $22.1 million in 2008, driven by investment losses, before rebounding to $52.1 million during the first six months of 2009. This year’s earnings come with a caveat, though.
Help From FASB
Symetra’s pretax profit would have been 92 percent less were it not for rule changes by the Financial Accounting Standards Board last spring. That’s when the FASB caved to pressure by Congress and rushed to expand the range of investment losses that banks and insurance companies can exclude from their reported earnings, even when they conclude the losses aren’t temporary.
Additionally, White Mountains collects fees for managing Symetra’s investments -- $57 million in all since the start of 2006. For example, when White Mountains invests Symetra’s money in a hedge fund or in corporate equities, it gets an annual fee equivalent to 1 percent of the investment’s value.
White Mountains’ $14.6 million of fees last year exceeded Symetra’s $13 million of pretax income. Nice work if you can get it. (Symetra’s net income was greater than pretax profit because of a large deferred-tax benefit.) Like Berkshire, White Mountains has a 26 percent stake in Symetra. Berkshire also had been White Mountains’ second-biggest shareholder until it sold its stake back to the company last year.
We can’t blame Buffett for wanting to sell some of his company’s Symetra shares, which amount to a tiny fraction of Berkshire’s $275 billion of assets. Berkshire’s shareholders should be pleased if he can. Symetra also filed to go public in 2007, only to cancel the offering when the IPO market dried up.
You have to wonder, though, why anyone would want to be on the other side of this trade.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net
Last Updated: October 7, 2009 21:00 EDT
http://www.bloomberg.com/apps/news?pid=20601039&sid=ah5Yse3JbqFI
Wednesday 7 October 2009
No Penny Stock Trading For Me
"The reason that the stock market can be dangerous (or perceived dangerous) for the average investor is because we’re not really dealing with tangible assets here. To look at our supermarket analogy again, if you went to the bread isle and there was a loaf of bread for one dollar and a moldy loaf of bread for 50 cents, which would you buy? Surely, you would pay a little extra money to buy the good loaf!"
http://www.thedigeratilife.com/blog/penny-stock-trading/
http://www.thedigeratilife.com/blog/penny-stock-trading/
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