Transformation on track for Pos Malaysia

Transformation on track for Pos Malaysia

Written by Financial Daily
Tuesday, 08 March 2011 11:12


Pos Malaysia Bhd
(March 7, RM3.05)

Maintain buy at RM3.08 with revised target price of RM4.12 (from RM4.45): Pos Malaysia’s analyst briefing was centred on the latest 4Q results and progress made on its transformation master plan, which highlighted the impact to volume following the postal tariff hike, measures to mitigate the impact of declining mail volume as well as its efforts to reduce operating costs through effective delivery beat management. All in, we gather that Pos’ transformation plan remains on track given that all its 2010 key performance indicators had been achieved.

While we expect mailing volume to continue to decline, the retail contribution from its tie-ups with banks will offset the overall impact. Revenue growth is projected to be on an uptrend as the company would see the full effects of the tariff hike in FY11.

Furthermore, we expect overall margins to continue to expand as the impact of the postage will offset the full year effect of the 2010 salary hike.

However, owing to spiralling costs on assumption of higher jet fuel and staff costs, we are trimming our earnings forecasts by 17.1% for FY11 and 13.3% for FY12.

The unveiling of its strategic partner is expected to be announced in the next one to two months as the deadline of March 15 for bidding draws near.

Potential relaxation of the use of its lands bank under the purview of the Postal Bill appears to be progressing well as the draft Bill will be tabled in Parliament this month. We expect the proposed amendments related to relaxation will go through as it would make more economic sense for the government to optimise the potential value of the landbank.

We maintain our “buy” recommendation on Pos, but have downgraded our target price to RM4.12 following the downward revision in earnings (from RM4.45).

We continue to value Pos on a sum-of-parts basis to capture the near-term earnings impact, where we apply a 14-time PER (from 13 times historical forward PE with inclusion of the strategic partnership catalyst premium), and the value of its five pieces of land not under the purview of the Postal Bill and its net cash. Maintain buy. — OSK Research, March 7


This article appeared in The Edge Financial Daily, March 8, 2011.

Banking sector: Valuations are undemanding

Banking sector: Valuations are undemanding

Written by Financial Daily
Tuesday, 08 March 2011 11:28


Banking sector
Maintain overweight:

The sector’s value proposition lies in (i) stable economic growth which lends support to our aggregate net profit growth forecast of 11.6% for 2011 and 11.8% for 2012; (ii) benign inflation and bottoming margins; (iii) steady loan growth momentum; (iv) potential Economic Transformation Programme upside surprises; (v) cross-synergies and burgeoning contribution from regional operations to group earnings; (vi) healthy capital ratios; and (vii) decent valuations and dividend yields. RHB Capital and CIMB continue to be our top picks.

Results were broadly within expectations, with recurring net profit up 24% year-on-year (y-o-y). While cumulative loan growth was a commendable 12.9% y-o-y, net interest margin (NIM) compression during the period contributed to a more moderate 10.3% y-o-y expansion in net interest income, while fee income and other non-interest income growth rates were a modest 6.8% y-o-y respectively. Operating expenses, meanwhile, rose 10.1% y-o-y. Consequently, operating profit rose by a slower 11% y-o-y, while the jump in net profit was driven primarily by lower loan loss provisions, which fell a sizeable 34.5% y-o-y in 2010.

Our industry loan growth estimate is raised to 11.5% for 2011 from 10%-11% previously and we forecast 2012 loan growth at 10.5%. We expect household loan demand to moderate from 13.2% for 2010 to about 10.5% for 2011 and 8% for 2012, but expect non-household (business/government) lending to pick up the slack with growth rates of 12.7% and 13.5% for 2011 and 2012 respectively, from 12.3% for 2010.

We project recurring net profit growth of 11.6% and 11.8% for 2011 and 2012 respectively for the top 5 banks, on operating profit growth of 8.6% for 2011 and 12.4% for 2012. We expect cumulative loans (domestic and regional) for the top 5 banks to expand by 12% for 2011, 10.9% for 2012. While we have imputed a 6-11 basis points NIM contraction this year, we expect NIMs to bottom out and recover in 2012, aided in part by likely rate hikes in 2H10. Amid volatility in the external environment, we are factoring in moderately higher non-performing loans.

Valuations are undemanding, in our opinion, with the large banks trading at a prospective 2011 calendarised PER of 13.1 times, 11.7 times for 2012. Separately, the sector trades at a prospective 2012 P/BV of 1.9 times supported by an average ROE of 16.9%. Dividend yields, meanwhile, average a decent 4.2% and 4.7% for 2011 and 2012 respectively. — Maybank IB Research, March 7


This article appeared in The Edge Financial Daily, March 8, 2011.

Cocoa crunch

Cocoa crunch


Written by Chong Jin Hun
Monday, 07 March 2011 11:45


KUALA LUMPUR: Having a cup of nicely brewed coffee and a chocolate brownie for your afternoon tea break could soon be an expensive affair should the price of coffee and cocoa beans continue to rise.

Costlier coffee and cocoa beans are also eating into the profit margins of the food and beverage (F&B) manufacturers beyond putting a squeeze on consumers’ wallets.

Against such a backdrop, some of the consumer stocks on Bursa Malaysia — long considered sound defensive picks — are becoming less safe due to the looming margin squeeze and weaker demand as their products get more expensive.

Already, these companies, including names like Nestle (M) Bhd, Cocoaland Holdings Bhd, London Biscuits Bhd and Apollo Food Holdings Bhd, have reported weaker quarterly results due to higher input costs.

Cocoa prices rose to a 32-year high at US$3,706 (RM11,230) a tonne last week due to the ongoing political crisis in Ivory Coast, which produces 60% of the world’s output. The commodity has rebounded 46% from a low of US$2,543 a tonne in June, 2009.

Meanwhile, supply fears pushed the price of coffee to a high of US$2.74 (RM8.30) a pound in February, more than double the low of US$1.27 a pound seen in March 2009. Concerns over poor harvests in coffee producing countries like Mexico, Colombia and Kenya have been exerting upward pressure on prices.

Nestle’s net profit for 4QFY10 ended Dec 31, plunged 54% to RM39.3 million from RM86.2 million in the corresponding period a year ago, despite higher revenue of RM963.9 million versus RM950.6 million. The group attributes the profit contraction to the sharp increase in cocoa and milk prices that dented its gross margin.

Nestle says the average price of cocoa powder more than doubled in 2010 compared with the previous year, while the price of skimmed milk powder rose about 20%.

“The sharp increase in global commodity prices and the government’s gradual reduction in food and fuel subsidies, which puts pressure on the group’s input costs, remains a concern.

“The group will continue to closely monitor the development of commodity prices, evaluate and adjust its pricing policy accordingly,” Nestle said in its results briefing.

Where possible, Nestle says it will use operational efficiencies and cost-saving measures to avoid passing on the price increases to consumers.

To mitigate the cost pressures, Nestle raised prices for some of its products last month. The price of Milo Fuze and powder products have gone up by between 5% and 6%, while the price for the Nescafe three-in-one product is up by 4%.

Nestlé is seen as a reference point when it comes to raising prices, analysts and industry observers say. Other food manufacturers are expected to follow in Nestle’s footsteps.

Tai Chun Wah, Cocoaland’s group accountant, says rising cocoa bean prices will crimp the company’s bottom line in the short term.

Tai says the manufacturer, which produces chocolate confectioneries, will pass the additional cost to consumers within six months.

“In the short term, the higher inputs costs will reduce profits,” Tai says.

Cocoaland’s net profit halved to RM9.52 million for FY2010 ended Dec 31. In its latest quarterly result announcement, Cocoaland warned that it faces greater challenges ahead in anticipation of higher raw material prices and intense competition in domestic and overseas markets.

Tai believes that raising selling prices is an emerging trend as big players like Nestle have started to do so. “Consumers have to accept it,” he says.

He adds that he expects cocoa prices to rise further due to supply concerns.

London Biscuits said in its results announcement for 2Q ended Dec 31, that it expects its financial year ending June 30, will be another challenging year. The confectioner reported a 76% plunge in net profit to RM1.08 million for the quarter.

Apollo, meanwhile, saw its net profit decline 31% to RM3.95 million in 2Q2010 ended Oct 31. It attributes this to higher operating costs and lower gains from the disposal of available-for-sale financial assets.

“Despite the improvement in the global and domestic economy, the group’s operating environment is expected to remain challenging and competitive,” the company said in notes accompanying its quarterly numbers.

While the F&B companies are feeling the bite of high commodity prices, there is a liver lining for some, as Malaysia is a producer of cocoa, though not a major one.

Malaysia produced 18,152 tonnes of cocoa beans in 2009, according to the Malaysia Cocoa Board. Of this amount, 13,213 tonnes came from Peninsular Malaysia, 3,688 tonnes from Sabah and 1,251 tonnes from Sarawak. Production is estimated to have fallen to 15,654 tonnes in 2010.

Malaysia’s cocoa bean production is mostly undertaken by smallholders, rather than large plantation players, and these smallholders will benefit from higher prices.

The country’s cocoa production has declined greatly as low prices in the past prompted farmers to switch to more lucrative crops. In 1990, for instance, the country produced 247,000 tonnes -- a staggering 13.6 times more than 2009’s output.

Guan Chong Bhd, a cocoa-ingredient producer, is riding the rally in cocoa prices. It is sitting on a large inventory of cocoa beans that has appreciated in value due to rising prices. The company’s inventories totalled RM154.92 million as at end-2010

“We can buy high and sell high,” says Brandon Tay Hoe Lian, Guan Chong’s managing director and CEO. He adds that the company can always pass on additional costs to customers.

For FY2010 ended Dec 31, Guan Chong’s net profit soared seven-fold to RM100 million as revenue rose 83% to RM1.17 billion.

The company says its financials were also helped by foreign exchange gains due to the strengthening ringgit. The firm also booked gains from commodity futures contracts, and foreign exchange derivatives.

It is also worth watching companies like MBf Holdings Bhd, which operates coffee and cocoa plantations in Papua New Guinea.

MBf Holdings’ website indicates that the company has a 1,100ha coffee plantation and 2,100ha of land for tea cultivation in Papua New Guinea. Details about its cocoa operations were however not specified.

Agriculture operations in Papua New Guinea accounted for 11% of MBf’s revenue in the financial year ended Dec 31, 2010, its latest quarterly results showed.


This article appeared in The Edge Financial Daily, March 7, 2011.

How to overcome your financial fears in investing?

These are the usual three basic fears one has to face in investing, namely:

Fear of loss
Fear of failure
Fear of unknown

Here are some suggested ways to overcome these:

Fear of loss:  Understand the probabilities and consequences of any potential loss(es) in your investing.  Always remember, in the face of uncertainties, your investing actions should be based on the consequences rather than the probabilities of these loss(es) occurring.

Fear of failure:  Nothing venture, nothing gain.  Without trying, you have already failed.  Seize the opportunity.  Be prepared for possible failures too, but take these as valuable lessons preparing you for a better future.

Fear of the unknown:  Research the topic well to become knowledgeable.


Also read:
I Will Tell You How to Become Rich: "Be fearful when others are greedy, and greedy when others are fearful."
http://myinvestingnotes.blogspot.com/2010/12/i-will-tell-you-how-to-become-rich-be.html

There's value in the basics. Stick to some simple rules when investing

February 28, 2011

Share star...Lexie Petroff trusts her ears and her instincts when investing. Photo: Simon O'Dwyer

In the final instalment of a three-part series, Bina Brown recommends sticking to some simple rules when investing.

Whether it is through a share club, a stockbroker, a financial adviser or reading books, there is nothing more valuable than knowledge when it comes to understanding the sharemarket.

There are some basic truisms that you will repeatedly come across, such as: don't put all your eggs in one basket and it is time in the market, not timing. While the temptation might be there to invest heavily in one company at the expense of any others, or put everything in the sharemarket while ignoring other asset classes, it is not a sound strategy.

Advertisement: Story continues below

Diversification reduces risk. Diversification can be quite broad, where you invest some money in shares, property and cash. In the event one of these asset classes declines, you have not lost everything. A diversified share portfolio might be one that includes investments in sectors, including banking and finance, media, health and resources. Diversification generally means a lower level of volatility and higher long-term return.

Then there is that saying: It is the time in the market - not timing the market. It has been repeatedly proven that all shares have their troughs and peaks but, with great companies, the peaks are generally significantly stronger than the troughs.

If there is a downturn or correction in the market, it is important investors don't panic and realise their losses at the worst time. Nor would they want to be out of the market when the market bounces back.

Dollar-cost averaging sits well with timing. It is human nature to sell things when times are bad (so things are cheap) and buy when times are good (usually more expensive).

Essentially, if you decide to invest $1000 twice a year in one company, assuming the shares rise and fall in that time, you will end up buying the most shares when they are at their lowest price and the least shares when they are at their highest.

Portfolio construction

A Prescott Securities private client adviser, Ben Prisk, says diversification of stocks is an important component in portfolio construction. However, the risk reduction benefit is less with each share added to a portfolio, he says.

"Given most share investors are trying to outperform the return of the broader All Ordinaries sharemarket index, some level of risk by way of establishing concentrated positions is good," Prisk says.

He says that depending on the amount of money someone has to invest, on average the target is for 10 to 20 stocks across a portfolio, where the benefits of diversification are not outweighed by the added complications.

He says it is often a temptation to keep acquiring new stock positions across a portfolio without assessing the broader merits of doing so. It might be time for some hard decisions.

Prisk says investors should be prepared to take a profit on a particular stock or possibly crystallise a loss if they see a better buying opportunity. "Whilst it is psychologically difficult to sell investments at a loss, if you can't establish an earnings catalyst for a particular company in the foreseeable future, the disposal and subsequent repositioning of the investment can deliver improved performance to your portfolio," he says.

Gearing

Going into debt to buy shares will not be for everyone but those who are happy to borrow money might consider two options.

The first is a margin loan, using the shares as security against a loan. If the value of the shares falls, an investor may have to either sell some shares to reduce the loan-to-valuation ratio or find some more cash.

Another, generally cheaper, option is to use existing equity in your home.

Hans Kunnen, a respected market economist, author and former head of investment markets research at Colonial First State, says borrowing to buy shares is like borrowing to buy an investment property but is less risky, has less paperwork and you can start with less money.

"Dividends pay off interest costs over time, your loan is tax deductible and dividends come with a large part of their tax already paid," Kunnen says. "Borrowing to buy shares is all about patience and cash flows. It is not about getting rich overnight. Good-quality, dividend-paying companies have seen their dividends rise over time and will see further growth as the Australian economy expands."

Keeping a finger on the pulse

TWO-TIME winner of the Bayside Shares Investor Award, Lexie Petroff, uses her own instincts to select the companies in which she is going to invest.

"I read newspapers and follow the news and generally watch what the community is saying and doing," says the Melbourne-based naturopath. Using this simple formula Lexie sold her shares at the start of the global financial crisis at a high.

She is now back in the market, following the same logic, although not as intensely as before the market crashed.

Being a naturopath she decided to invest in natural health care provider Blackmores.

"Last year I thought because things were starting to slow down people would be looking for bargains so I invested in The Reject Shop," she says. Her award was for investing a hypothetical $120,000 to pick the best performing portfolio of six stocks in 2010.

Her picks also included Blackmores and Cochlear. Lexie joined the Bayside Blue Chip Share Society — one of several share clubs operating around the country — in about 2006 and continues to meet regularly with a group of investors to discuss shares and listen to sharemarket professionals. "It is a very worthwhile opportunity to meet others who are interested in shares and discuss what is going on in the economy," she says.

The founder of the society, Gavin Adamson, says that while the society is blue chip by nature, many of its members hold a combination of blue-chip, mid-cap and speculative shares in their portfolios.

http://www.smh.com.au/money/investing/theres-value-in-the-basics-20110228-1balo.html

Guan Chong starts grinding cocoa in Indonesia

Published: 2011/03/02

MALAYSIA'S largest cocoa processor Guan Chong Bhd (5102) has commissioned its cocoa grinding plant in Batam, Indonesia, which is expected to improve earnings significantly.

The plant boasts of an initial annual grinding capacity of 60,000 tonnes, increasing the group's total production by 75 per cent to 140,000 tonnes a year. This makes Guan Chong one of the largest cocoa processors in Asia, the company said in a statement yesterday.

The group's existing 80,000 tonnes plant in Pasir Gudang, Johor is almost fully utilised due to a rise in global demand for its cocoa ingredients, it added.

Managing director and chief executive Brandon Tay Hoe Lian said the group had shipped out about 200 MT of cocoa products just two weeks into production at its Batam plant.
He said with a grinding plant in Indonesia, the group can also benefit from processing zero-tariff raw materials.

The plant in Pasir Gudang processes cocoa beans mainly from Indonesia, which recently started to impose export tax of up to 15 per cent on Indonesia-produced cocoa beans on a schedular basis.

Last year, Guan Chong posted a net profit of RM100 million on a revenue of RM1.2 billion.

Read more: Guan Chong starts grinding cocoa in Indonesia http://www.btimes.com.my/Current_News/BTIMES/articles/GUAN1/Article/#ixzz1FOfLsNkH

Calculating Dividends

For example:


PBB
Par Value $1
Tax rate 25%


Company declared dividends per share of:


2nd Interim Franked Cash Dividend 25% Less Tax & 8% Single Tier Cash Dividend




What is the amount of dividend per share you should receive?


Answer:


[(25% x Par Value) x (1-Tax rate)] + 8% x Par Value
= (25% x $1) x (1 - 25%)] + 8% x $ 1
= ($ 0.25 x 75%) + $ 0.08
= $ 0.1875 + $ 0.08
= $ 0.2675


Therefore, you should receive $ 267.50 per 1000 shares (= $ 0.2675 x 1000 ).

Guan Chong expands cocoa grinding capacity to 140,000 tonnes annually

Guan Chong expands cocoa grinding capacity to 140,000 tonnes annually
Written by Joseph Chin of theedgemalaysia.com
Tuesday, 01 March 2011 14:19

KUALA LUMPUR: GUAN CHONG BHD [] has expanded the capacity for cocoa grinding to 140,000 tonnes a year with the successful commissioning of its plant in Batam, Indonesia.

The company said on Tuesday, March 1 it had invested about RM70 million in the first phase of CONSTRUCTION [] and installation of the new plant which has an initial annual grinding capacity of 60,000 tonnes.

“With the new facility, Guan Chong now has a total annual capacity of 140,000 tonnes, adding to the group’s 80,000 tonne facility in Pasir Gudang,” it said.

The Pasir Gudang plant processes cocoa beans mainly from Indonesia, which recently started to impose export tax of up to 15% on Indonesia-produced cocoa beans on a schedular basis.

Guan Chong said with a grinding plant in Indonesia, it would benefit from processing zero-tariff raw materials.

The Batam plant houses an office, warehouse, and production floor containing state-of-the-art production equipment of cocoa presses and filters to produce the whole assortment of cocoa butter, powder, liquor, and cake.

Subsequent two phases of the construction and installation will enable the plant to have a final annual capacity of 120,000 tonnes.

Nestle 4Q net profit falls 54pct to RM39.26m as margins squeezed

Nestle 4Q net profit falls 54pct to RM39.26m as margins squeezed
Written by Surin Murugiah of theedgemalaysia.com
Thursday, 24 February 2011 19:36


KUALA LUMPUR: Nestle (Malaysia) Bhd’s net profit fell 54.5% to RM39.26 million in the fourth quarter ended Dec 31, 2010 from RM86.22 million a year ago, as its profit margin was squeezed mainly by higher investments in brand building, overhead expenses and increase in commodity costs.

Nestle had on Thursday, Feb 24, said its revenue for the quarter rose to RM963.89 million from RM950.63 million. Earnings per share were 16.74 sen while net assets per share was RM2.62.

It proposed a final dividend of RM1.15 per share, under the single-tier system.

For the financial year ended Dec 31, Nestle's net profit rose 11.25% to RM391.39 million from RM351.79 million in 2009, while revenue rose to RM4.03 from RM3.74 billion.

Nestle said the higher revenue to the positive developments in both the local and global economies.

“With the improvement of the Malaysian economy, most of the domestic product categories continued to perform well. This was quite evident for Nestle liquid drinks and chilled dairy which achieved double digit growth.

"From a channel perspective, both retail and out of home sales enjoyed good growth," it said.

On its current year prospects, Nestle said that after an encouraging 2010, the local economy was expected to grow further, leveraging on the government's Economic Transformation Plan.

Nestle said the sharp increase in the global commodity prices and the government's gradual reduction in food and fuel subsidies which put pressure on its input costs remained a concern.

"The group will continue to closely monitor the development of commodity prices, evaluate and adjust its pricing policy accordingly.

"Where possible the group will leverage operational efficiencies and cost savings initiatives to avoid passing on price increases to consumers," it said.

Carlsberg 4Q net profit up 51.8% to RM30.49m

Carlsberg 4Q net profit up 51.8% to RM30.49m
Written by Surin Murugiah of theedgemalaysia.com
Thursday, 24 February 2011 20:13


KUALA LUMPUR: CARLSBERG BREWERY MALAYSIA BHD []’s net profit rose 51.8% to RM30.49 million in the fourth quarter ended Dec 31, 2010 from RM20.09 million a year ago, driven by higher export and contract manufacturing sales.

It said on Thursday, Feb 24 revenue rose to RM326.06 million from RM300.40 million in 2009. Earnings per share were 9.97 sen while net asset per share was RM1.93. It announced a final gross dividend of 7.5 sen per and special gross dividend of 43 sen share.

For the financial year ended Dec 31, 2010 Carlsberg's net profit surged to RM133.24 million from RM76.14 million in 2009, on the back of revenue RM1.37 billion in FY10 from RM1.05 billion in FY09.

Carlsberg said the increased in profit was due to

• higher domestic sales, 
• the synergies arising from the acquisition of Carlsberg Singapore Pte Ltd and 
• the good performance in the super premium segment through its subsidiary Luen Heng F&B Sdn Bhd.

On its current year prospects, Carlsberg said the move by the government not to raise excise duties for beer and stout products in Budget 2011 was a clear indication that the government was sensitive to the industry and the public as Malaysia was already the second highest excise duty paying country in the world after Norway.

"In line with this, we expect the domestic beer market to grow moderately in 2011," it said.

Insas associate Inari gets Bursa Securities nod to list on ACE Market

Insas associate Inari gets Bursa Securities nod to list on ACE Market
Written by Surin Murugiah of theedgemalaysia.com
Friday, 25 February 2011 11:17


KUALA LUMPUR: Inari Bhd, an electronic manufacturing services (EMS) provider in the semiconductor industry, has been given the nod by Bursa Malaysia Securities Bhd to list on the ACE Market.

In a statement on Friday, Feb 25, Inari said it was expected to list in the second quarter on 2011. Inari is a 44% associated company of Main Market-listed INSAS BHD [].

Its managing director Dr Tan Seng Chuan said since the company’s inception in 2006, it had not only positioned itself as a leading EMS player in the RF segment of the semiconductor industry, but also grown rapidly in capacity and revenue.

“The group’s strong growth necessitates our listing exercise to raise funds for future expansion,” said Tan.

The company provides semiconductor packaging services for global players in radio frequency (RF) mobile industry, which include backend wafer processing and RF testing.

Its finished products are System in Package (SiP) and Quad Flat No-Lead (QFN), key components used in the manufacturing of a wide range of electronic products

Inari said its products were used mainly in the wireless telecommunications, including smartphones and medical sectors, with its customer base including Avago Technologies Trading Limited, Vigsys Sdn Bhd, Ceedtec Sdn Bhd and Newict (M) Sdn Bhd.

Paramount advances after 4Q strong earnings, boost from Jerneh Insurance sale

Paramount advances after 4Q strong earnings, boost from Jerneh Insurance sale
Written by Joseph Chin of theedgemalaysia.com
Friday, 25 February 2011 11:33


KUALA LUMPUR: Shares of Paramount Corp Bhd was among the top gainers in the morning on Friday, Feb 25 after it announced a strong set of earnings, which were boosted by the 20% equity in Jerneh Insurance Bhd and higher margins achieved in property development.

At 11.28am, Paramount rose 34 sen to RM4.85 with 345,200 shares done.

The FBM KLCI rose 2.98 points to 1,492.85, off the early high of 1,499. Turnover was 522.46 million shares valued at RM620.44 million. There were 386 gainers, 278 losers and 248 stocks unchanged.

On Thursday, Paramount said while 4QFY10 revenue was at RM102.9 million, a slight decline from RM104.5 million a year ago, profit before tax of RM87.1 million was substantially higher compared with RM22.0 million a year ago.

This 296% increase was attributed to a gain of RM60.8 million recognized on the disposal of the Group’s 20% equity in Jerneh Insurance and higher margins achieved in property development.

It also said FY10 revenue grew by 7% to RM432.3 million from RM404.9 million recorded in FY09 the previous year while profit before tax grew by 123% to RM177.1 million from RM79.3 million in FY09.

Discounting the gain from the disposal of Jerneh Insurance, it said the group’s core businesses, that is property development, CONSTRUCTION [] and educational services contributed to 47% of the growth in profits.

Boustead 4Q net profit up 41% to RM208.9m, declares 12c dividend

Boustead 4Q net profit up 41% to RM208.9m, declares 12c dividend
Tags: Boustead Holdings Bhd

Written by Surin Murugiah of theedgemalaysia.com
Friday, 25 February 2011 14:21


KUALA LUMPUR: BOUSTEAD HOLDINGS BHD []'s net profit rose 41.4% to RM208.9 million for the fourth quarter ended Dec 31, 2010 from RM147.7 million a year ago due mainly to notable increase in revenue from both the PLANTATION [] and trading divisions.

It said on Friday, Feb 25 revenue for the quarter rose to RM1.69 billion from RM1.48 billion. Earnings per share were 22.22 sen while net assets per share was RM4.50. It declared a fourth interim single tier dividend of 12 sen per share, to be paid on March 31 this year.

For the year ended Dec 31, 2010 Boustead’s net profit jumped 57.3% to RM537.5 million from RM341.6 million in 2009, while revenue grew to RM6.18 billion from RM5.39 billion.

Commenting on its prospects, Boustead said although the Malaysian economy was projected to grow at a steady pace in 2011, and the outlook for the other regional economies was also expected to be favourable, it was bracing itself for yet another challenging year ahead, as the global economies may be badly hit in the event of a large sovereign debt default in Europe in addition to the short-term monetary policies tightening by China and India.

It said plantation's earnings will very much be dependent on palm oil prices which are expected to stay at attractive levels in 2011, largely due to the low supply situation brought on by adverse weather conditions and the expected increase in demand.

It said the heavy industries division's prospects would be underpinned by contracts on hand, and the finalisation of the value and duration of the project to construct six naval vessels will be positive for earnings.

“The property division can look forward to stable recurring income from its portfolio of commercial and retail PROPERTIES [] and the expansion of the hotel operations.

“The addition of PHARMANIAGA BHD [] in the coming year will enable the group to take advantage of the Pharmaniaga brand and infrastructure to grow revenue and profit in the lucrative pharmaceutical business. The other divisions are expected to perform satisfactorily in 2011,” it said.

Lonpac to focus on S'pore, Cambodia ops

Lonpac to focus on S'pore, Cambodia ops
By Rupinder SinghPublished: 2011/02/28


GENERAL insurer Lonpac Insurance Bhd is putting on hold its plans to venture into other overseas countries to focus on growing its operations in Cambodia as well as Singapore.

A wholly-owned subsidiary of LPI Capital Bhd (8621), Lonpac currently has operations in Singapore and Cambodia.

"Cambodia has been a success story and represented a learning curve for us. The challenge now for us to build our market share in Cambodia further," Lonpac's adviser Tee Choon Yeow told Business Times.

In three years since it started business in Cambodia, the insurer has gained 20 per cent market share where the total industry gross premium is only US$20 million (RM61 million) shared among six insurers.
Lonpac aims to capture a 35 per cent market share in Cambodia in the next five years while generating a return on equity of 25 per cent.

Lonpac has consecutively made underwriting profits from the first year in Cambodia and therefore sees a lot of potential in the kingdom.

In 2010, Lonpac's regional business in Cambodia contributed a net profit share of RM743,000.

Domestic operations contributed 98.9 per cent of the group's profit before tax last year.

LPI Capital and Public Bank Bhd (PBB) have a common shareholder in Tan Sri Teh Hong Piow, who is also chairman of PBB and non-executive chairman of LPI Capital.

Lonpac operations in Cambodia is via Campubank Lonpac Insurance Plc, a joint venture company with PBB.

Lonpac is planning to open another branch in Siem Reap this year when business volume is big enough and aims to tap into PBB's customer base.

PBB unit Cambodian Public Bank plc has carried out commercial banking business in Cambodia since May 1992 and currently has 20 branches strategically located in the country.

For its Singapore branch, he said its business portfolio had been restructured to underwrite more personal lines businesses from the volatile motor insurance previously.

The move is expected to help the Singapore unit to break even and show a small underwriting profit.

Although the Cambodia and Singapore units are still not a significant contributors, Tee expects both ventures to contribute 20 per cent to the group in five years. - By Rupinder Singh


http://www.btimes.com.my/Current_News/BTIMES/articles/lonpac24/Article/#ixzz1FCmQzCDw

'Expensive' shares: Do not look at how high the share price is. It is the valuation that counts.

Quick Comment: 'Expensive' shares

Some time ago, I had a conversation with my ASX remisier based in Australia and I think some of his comments are worth sharing.

*Me refers to myself when I was speaking to him.
*Investssmart is also myself but from my point of view now.

Me: Good shares in Malaysia are expensive.
Remisier: What do you mean by expensive? When you say expensive, do you mean in absolute terms or in terms of valuation? When I say it is expensive, it normally means overvalued or fully valued. Some companies can trade at $30 but we still call them cheap.
Investssmart: This is very true. The word expensive should be used more carefully when talking about shares. The absolute value does not really count. A Mercedes for $100k is 'cheaper' than a Waja for $60k. It is the value that counts.

Me: Malaysians' perception is that the higher the share price is, the more it can drop.
Remisier: That happens all the time. It is important to remember that we should look at the movements in terms of percentage. If a $50 company can drop to $5, a $5 company can drop to 5c as well. The important thing is to fix the absolute amount you invest. Purchasing 100 shares in a $50 company is the same as purchasing 1000 shares in a $5 company. If both rise by 10%, you will still earn the same amount of $500 no matter which company you invest it. 
Investssmart: We should not be put off by the share price. It is the valuation that we should worry about. The chances of IRIS to drop from 90c to 20c is higher than the chances of BKAWAN dropping from $7.80 to $2. But somehow, if you give investors just these two choices, many would rather invest in IRIS because they think it is 'cheaper'!

Remisier: Do you remember me recommending you Rio Tinto ($30), BHP ($15), Woodside ($20) and Cochlear ($25)? You did not purchase any either! Perhaps, this changed your view on 'expensive' stocks!
Investssmart: These four stocks have skyrocketed since his recommendation. They are now about $75, $30, $45 and $50 respectively. Never say that upside of highly priced shares are limited. There is no such thing. Upside of overvalued/expensive shares is limited but upside of highly priced shares is not. Although I did not purchase these shares, it was not because I was scared of the high prices. It was mainly because I did not have the strong confidence in the commodity bull and sadly, I was proven to be wrong. Could have made tonnes more from the ASX. Nevertheless, in a bull market, almost everything on the ASX rose.


Me: I did not buy those few but I still bought some highly priced ones. What would I be trading if I don't buy any highly priced shares? I don't remember you ever recommending me any penny stocks!
Remisier: Good stocks are normally highly priced because the demand for good stocks is very strong. Lowly priced shares are normally those that are speculative or not performing. 
Investssmart: It is strange but true to a certain extent. Of course, it does not apply to all company shares.

Strange but could be true: I don't think it is a coincidence that most of the true blue chips throughout the world are trading at high prices. Most of these blue chips have been there for ages. It had to start off somewhere as a smaller company and it takes time to reach where it is today. If the company was trading at $1 ten years ago, it will probably trade at $10 today to be considered a top performer. Otherwise, it would not be considered a blue chip.

Fundamental based investors always look at companies that have excellent track records and therefore, end up investing in highly priced shares. That is because it is very rare that we can get such companies at low prices as share prices should have risen as companies perform well over the years. I doubt fundamental based investors would be interested in companies that trade at low prices over the last few years because that means that they probably do not have a good track record. Of course, this does not apply to all shares but I believe that it is true to a certain extent.



Conclusion: Do not look at how high the share price is. It is the valuation that counts.

http://investssmart.blogspot.com/2006_04_01_archive.html

Malaysians must be critical and analytical in their Political thinking. Which Party is more Progressive?

Guan Eng to Gerakan : Don't assume Penangites are stupid

Choppy waters still for Maybulk

Choppy waters still for Maybulk

Written by Joy Lee
Thursday, 24 February 2011 12:20


KUALA LUMPUR: Grey clouds continue to loom over the prospects of the Baltic Dry Index and companies related to the carriage of dry bulk goods such as Malaysian Bulk Carriers Bhd (Maybulk).

“To be very frank, I think it [the BDI] is going to remain weak going forward. Over the last few months, due to the flooding problems, the market has picked up. But for how long or if it is going to pick up further, we are not sure,” Maybulk’s executive chairman Teo Joo Kim said at a media briefing yesterday.

The BDI, which tracks various drybulk rates over routes on a time charter and voyage basis, peaked at 11,793 points in May 2008 but collapsed shortly after to as low as 663 points in December due to the global financial crisis. The index averaged at 2,758 points in 2010, a 5% improvement from the average of 2,617 points in 2009.

The index has been on a downtrend but picked up slightly at the start of February this year. Nonetheless, industry observers have not been optimistic of its prospects.

Chief executive officer Kuok Khoon Kuan said the BDI has been largely dragged down by the Capesize segment, referring to vessels which are too big to ply the Panama and Suez Canals and have to circle the Cape of Good Hope in Africa and Cape Horn in Chile, South America.

Kuok added that the tankers market is expected to remain weak, which has already affected Maybulk’s earnings.

For the fourth quarter ended Dec 31, Maybulk posted net profit of RM67.7 million, a 23% decrease year-on-year from RM88.45 million in the previous corresponding quarter. Revenue, however, rose 2.6% to RM84.73 million from RM82.61 million.

For the full year, net profit slipped 2% to RM238.37 million from RM243.8 million in FY09 due to weak tanker earnings and lower contribution from associate, PACC Offshore Services Holdings Pte Ltd (POSH) which declined by 72% to RM18.2 million from RM63.9 million in the previous year due to reduced activities in the oil and gas sector and oversupply of vessels in the service sector.

Overcapacity remains a concern for the industry, Kuok said. Additionally, Kuok said the hike in oil prices could derail economic recovery which spells a bleak outlook for the industry.

“In the past two years, the industry has been very concerned about oversupply. But the Lehman Brothers incident brought about a fair bit of cancellation and slippage. Therefore the huge worry of overcapacity did not happen,” Kuok said.

However, the group noted that there were a lot of new ship yards in China and South Korea which were desperate for orders and this may lead to competitive pricing and more new orders.

Maybulk is expecting two new handysize vessels and four long-term charter vessels to join its fleet from now till 2013. Currently, the group has 14 vessels comprising 11 bulk carriers and three tankers.

Teo noted that quite a number of its medium- and long-term charter contracts, which were carried forward at good rates, were coming to an end and these contracts could be renewed at lower rates.

“If the market doesn’t improve, then [Maybulk may see lower contribution from its bulk revenue this year compared to last year],” he said.

But he expects the O&G sector to pick up after a very weak showing in 2010.

Other than its shipping arm, Maybulk has 21.23% equity interest in Singapore based PACC Offshore Services Holding Group.

Maybulk has proposed a dividend of 10 sen for FY10 which is lower than the 15 sen paid for FY09. The company’s stock closed at RM2.76, slipping two sen.


This article appeared in The Edge Financial Daily, February 24, 2011.

Coastal Contracts 4Q net profit marginally stronger

Coastal Contracts 4Q net profit marginally stronger

Written by Financial Daily
Thursday, 24 February 2011 11:57


KUALA LUMPUR: Coastal Contracts Bhd’s net profit for 4QFY10 ended Dec 31 rose 3% to RM55.66 million from RM54.03 million a year ago, underpinned mainly by the delivery of higher end vessels.

In a filing with Bursa Malaysia yesterday, the group said revenue climbed 35% to RM203.4 million from RM150.9 million previously, while posting basic earnings per share of 15.36 sen versus 14.97 sen for the previous corresponding period. No interim dividend was declared for 4Q. Costal’s net assets per share stood at RM1.66.

For FY10 ended Dec 31, the group’s net profit surged 24% to RM200.87 million from RM162.44 million in FY09 on the back of improved revenue of RM675.25 million versus RM466.05 million in FY09.

On its prospects, Coastal expects a “reasonably satisfactory” financial performance for 2011 backed by the strong revenue visibility of the shipbuilding division’s vessel sales order book.

Shares in Coastal yesterday added 11 sen to close at RM2.71 with turnover of 706,100 units.


This article appeared in The Edge Financial Daily, February 24, 2011.

PetGas 3Q net profit up 50.4% to RM400m on higher gas processing revenue

PetGas 3Q net profit up 50.4% to RM400m on higher gas processing revenue
Written by Surin Murugiah of theedgemalaysia.com
Tuesday, 22 February 2011 19:30


KUALA LUMPUR: PETRONAS GAS BHD [] (PetGas) net profit increased 50.4% to RM400.74 million for the third quarter ended Dec 31, 2010 from RM266.47 million a year ago driven by higher gas processing and gas transportation revenue.

It said on Tuesday, Feb 22 that revenue rose 10% to RM892.69 million from RM810.89 million. Earnings per share were 20.25 sen while net assets per share was RM4.14.

For the nine months ended Dec 31, PetGas’s net profit rose 58.2% to RM1.17 billion from RM739.5 million a year ago while its revenue increased by 8.67% to RM2.63 billion from RM2.42 billion.

Commenting on its prospects, PetGas said revenue from the new fee structure under the gas processing and transmission agreement (GPTA) hinged on the volume of the gas processed at the gas processing plants as well as volume of gas delivered directly into the pipeline network.

“The performance based structure will continue to provide PetGas with additional earnings potential which is dependent on the level of production of by-products and their prices,” it said.

As internal gas consumption is provided by Petronas, PetGas’s exposure to fuel gas price fluctuation is eliminated, it said.

“The revised terms under the GPTA do not introduce new operating risks to PGB; it better defines the obligations of the parties to the GPTA.

“Prospects for the utilities business will depend on the pace of economic recovery. Any variation in gas price will be reflected in the pricing to customers,” it said.

Parkson 2Q net profit up 16.8% to RM93.8m, to speed up expansion

Parkson 2Q net profit up 16.8% to RM93.8m, to speed up expansion
Written by Surin Murugiah of theedgemalaysia.com
Tuesday, 22 February 2011 20:47

KUALA LUMPUR: PARKSON HOLDINGS BHD [], which reported RM93.8 million in earnings in the second quarter, plans to accelerate its expansion plan in the countries which operates and targets to add on average 20% new operating area to its portfolio.

It said on Tuesday, Feb 22 the 2Q earnings in the quarter ended Dec 31, 2010 was a 16.8% increase from RM80.31 million a year ago, driven by year end festivities and the holiday season.

Parkson, which operates in Malaysia, China and Vietnam, said revenue rose 6.7% to RM756.38 million from RM709.32 million a year ago. Earnings per share were 8.67 sen while net assets per share was RM1.89.

Commenting on its prospects, Parkson said its retail operations were expected to continue to record satisfactory results in the next quarter in view of the expected higher spending during the Chinese New Year festivities.

For the six months ended Dec 31, Parkson said gross sales proceeds rose 7.9% to RM4.554 billion from a year ago backed by improved same store sales growth in all three countries (Malaysia 10%, China 11% & Vietnam 23%).

“Operating profit increased by 9.0% to RM410.8 million and net profit attributable to the Group improved by 17.2% to RM170.0 million. Basic earnings per share were RM0.16, which grew by 11.9% over the same period of last year.

“As a result of the appreciation of ringgit against Chinese renminbi and Vietnamese dong, lower operating results were consolidated into the group,” it said.

Parkson said excluding the impact of the currency translation, on a comparable basis, the group's gross sales proceeds increased by 15.7% to RM4.884 billion as compared to the preceding year’s corresponding period.

Accordingly, on comparable basis, operating profit increased by 17.4% to RM442.6 million and net profit attributable to the group increased by 25.4% to RM181.8 million.

“In line with the improving macro economic outlook, the group believes domestic consumption will underpin the economic growth in all the countries it operates in.

“On the back of such expectations, the group is accelerating its expansion plan and is targeting to add on average 20% new operating area to its portfolio,” it added.

Parkson said it would focus on improving its market share in existing markets or entering into nearby markets by leveraging on the strength of its flagship store in cities or markets in which the group has established a strong presence with strong brand equity.

It added that attention would also be given to relatively affluent cities or new markets in order to further expand the group’s network and brand image.