Profit (accounting)

In accounting, profit is the difference between price and the costs of bringing to market whatever it is that is accounted as an enterprise (whether by harvest, extraction, manufacture, or purchase) in terms of the component costs of delivered goods and/or services and any operating or other expenses.

1 Definition 2 See also 3 Notes 4 References 5 External links

Definition

There are several important profit measures in common use which will be explained in the following. Note that the words earnings, profit and income are used as substitutes in some of these terms (also depending on US vs. UK usage), thus inflating the number of profit measures.

Gross profit equals sales revenue less Cost of Goods Sold (COGS), thus removing only the part of expenses that can be traced directly to the production of the goods. Gross profit still includes general (overhead) expenses like R&D, S&M, G&A, also interest expense, taxes and extraordinary items.

Operating profit equals gross profit less all operating expenses. This is the surplus generated by operations. It is also known as Earnings Before Interest and Taxes EBIT, Operating Profit Before Interest and Taxes OPBIT or simply Profit Before Interest and Taxes PBIT.

(Net) Profit Before Tax PBT equals operating profit less interest expense (but before taxes). It is also known as Earnings Before Tax EBT, Net operating income before taxes or simply Pretax Income.

Net profit equals Profit After Tax (unless some distinction about the treatment of extraordinary expenses is made). In the US the term Net Income is commonly used. Income before extraordinary expenses represents the same but before adjusting for extroardinary items.

Net income less dividends becomes retained earnings.

There are several additional important profit measures, notably EBITDA and NOPAT.

To accountants, economic profit, or EP, is a single-period metric to determine the value created by a company in one period - usually a year. It is the net profit after tax less the equity charge, a risk-weighted cost of capital. This is almost identical to the economist's definition of economic profit.

There are commentators who see benefit in making adjustments to economic profit such as eliminating the effect of amortized goodwill or capitalizing expenditure on brand advertising to show its value over multiple accounting periods. The underlying concept was first introduced by Schmalenbach, but the commercial application of the concept of adjusted economic profit was by Stern Stewart & Co. which has trade-marked their adjusted economic profit as EVA or Economic Value Added.

Some economists define further types of profit:

• Abnormal profit (or supernormal profit)
• Subnormal profit
• monopoly profit (super profit)

Optimum Profit - This is the "right amount" of profit a business can achieve. In business, this figure takes account of marketing strategy, market position, and other methods of increasing returns above the competitive rate.

Accounting profits should include economic profits, which are also called economic rents. For instance, a monopoly can have very high economic profits, and those profits might include a rent on some natural resource that firm owns, where that resource cannot be easily duplicated by other firms.

http://en.wikipedia.org/wiki/Operating_profit

Earnings before interest and taxes (EBIT)

In accounting and finance, earnings before interest and taxes (EBIT) or operating income is a measure of a firm's profitability that excludes interest and income tax expenses.


EBIT = Operating Revenue – Operating Expenses (OPEX) + Non-operating Income

Operating Income = Operating Revenue – Operating Expenses

Operating income is the difference between operating revenues and operating expenses, but it is also sometimes used as a synonym for EBIT and operating profit. This is true if the firm has no non-operating income.

A professional investor contemplating a change to the capital structure of a firm (e.g., through a leveraged buyout) first evaluates a firm's fundamental earnings potential (reflected by Earnings Before Interest, Taxes, Depreciation and Amortization EBITDA and EBIT), and then determines the optimal use of debt vs. equity.

To calculate EBIT, expenses (e.g., the cost of goods sold, selling and administrative expenses) are subtracted from revenues.^[3] Profit is later obtained by subtracting interest and taxes from the result.

Statement of Income — Example (figures in millions)
Operating Revenue
Sales Revenue	$20,438
Operating Expenses
Cost of goods sold	$7,943
Selling, general and administrative expenses	$8,172
Depreciation and amortization	$960
Other expenses	$138
Total operating expenses	$17,213
Operating income	$3,225
Non-operating income	$130
Earnings before Interest and Taxes (EBIT)	$3,355
Net interest expense/income	$145
Earnings before income taxes	$3,210
Income taxes	$1,027
Net Income	$2,183

(Table info source: Bodie, Z., Kane, A. and Marcus, A. J. Essentials of Investments, McGraw Hill Irwin, 2004, p. 452.)

http://en.wikipedia.org/wiki/Earnings_before_interest_and_taxes

Earnings before interest, taxes, depreciation and amortization (EBITDA)

EBITDA «ee-bit-dah» is the initialism for earnings before interest, taxes, depreciation, and amortization. It is a non-GAAP metric that is measured exactly as stated. All interest, tax, depreciation and amortization entries in the income statement are reversed out from the bottom-line net income. It purports to measure cash earnings without accrual accounting, canceling tax-jurisdiction effects, and canceling the effects of different capital structures.

EBITDA differs from the operating cash flow in a cash flow statement primarily by excluding payments for taxes or interest as well as changes in working capital. EBITDA also differs from free cash flow because it excludes cash requirements for replacing capital assets (capex).

EBITDA Margin refers to EBITDA divided by total revenue. EBITDA margin measures the extent to which cash operating expenses use up revenue.

Contents
* 1 Use by private equity investors
* 2 Use by debtholders
* 3 Use by shareholders
* 4 Unprofitable businesses

Use by private equity investors

In the process of purchase, long-life assets will be revalued to market values. Their depreciation and amortization will necessarily be changed. Control of the business allows the purchaser to move it to a new tax jurisdiction and to refinance its debt.

Use by debtholders

EBITDA is widely used in loan covenants. The theory is that it measures the cash earnings that can be used to pay interest and repay the principal. Since interest is paid before income tax is calculated, the debtholder can ignore taxes. They are not interested in whether the business can replace its assets when they wear out,therefore can ignore capital amortization and depreciation.

There are two EBITDA metrics used.

1. The measure of a debt's pay-back period is Debt/EBITDA. The longer the payback period, the greater the risk. The metric presumes that the business has stopped making interest payments (because interest is added back). But it is argued that once that happens the debtholder is unlikely to wait around (say) three years to recover their principal while the business continues to operate in default. So does the metric measure anything? There is also the problem of adding back taxes. This metric ignores all tax expenses even though a good portion are cash payments, and the government gets paid first. Principal repayments are not tax-deductible.

2. One interest coverage ratio (EBITDA /Interest Expense) is used to determine a firm's ability to pay interest on outstanding debt. The greater the multiple of cash available for interest payments, the less risk to the lender. The greater the year-to-year variance in EBITDA, the greater the risk. Because interest is tax-deductible it is appropriate to back out the tax effects of the interest, but this metric ignores all taxes.

The ratios can be customized by reducing Debt by any cash on the balance sheet or by deducting maintenance CapEx from EBITDA to form a measure closer to free cash flow.

Use by shareholders

Public investors' use of EBITDA arose from their perception that accountants' measure of profits, using accrual accounting was manipulated, that a measure of cash earnings would be more reliable.

It is true that PE can use this metric. And it is true the professional analysts using detailed discounted cash flow models should replace non-cash expenses with projected time-weighted payments. But none of that applies to retail investors' reality.

EBITDA does NOT measure cash earnings because it omits all the tax expenses even though a good portion are cash payments. It also fails to correct for other non-cash expenses, e.g. warranty expense, bad debt allowance, inventory write-down, stock options granted.

It does not include the cash flows from changes in working capital. Suppose a business sells all its opening inventory in a year and replaces the same number of units but at a higher price because of inflation. The profits of a company using FIFO inventory valuation will not include that extra cash cost. Suppose the business is expanding and need to stock a larger number of units. That additional cash cost is not in anyone's EBITDA measure.

When using this metric to replace accountant's earnings it presumes to measure an economic profit. But any economic profit must include the cost of capital and the degradation of long-life assets. This metric simply ignores both. Warren Buffett famously asked, "Does management think the tooth fairy pays for capital expenditures?" Depreciation may not be exact but it is the most practical method available. It succeeds in equating the positions of companies using three different ways to finance long-life assets. It can be interpreted as:

1. the allocation of the original cost, at a later date, when the asset was used to generate revenue. The time-value-of-money (same argument used above) means that depreciation may understate the cost.
2. the amount of cash required to be retained in order to finance the eventual replacement asset. Since inflation is the basis for time-value-of-money, the amounts set aside today must be invested and grow in value in order to pay the inflated price in the future.
3. the decrease in value of the balance sheet asset since the last reporting period. Assets wear out with use, and will eventually have to be replaced.

Unprofitable businesses

When comparing businesses with non profits, their potential to make profit is more important than their Net Loss. Since taxes on losses will be misleading in this context, taxes can be ignored. Capital expenditures and their related debt result in fixed costs. These are of less importance than the variable costs that can be expected to grow with increasing sales volume, in order to cover the fixed costs. So depreciation and interest costs are of less importance. It is likely that an unprofitable business is burning cash (has a negative cash flow), so investors are most concerned with "how long the cash will last before the business must get more financing" (resulting in debt or equity dilution).

EBITDA is not used as a valuation metric in these circumstances. It is a starting point on which future growth is applied and future profitability discounted back to the present. Equity owners only benefit from net profits, after all the expenses are paid.

During the dot com bubble companies promoted their stock by emphasising either EBITDA or pro forma earnings in their financial reports, and explaining away the (often poor) "income" number. This would involve ignoring one-time write-offs, asset impairments and other costs deemed to be non-recurring. Because EBITDA (and its variations) are not measures generally accepted under U.S. GAAP, the U.S. Securities and Exchange Commission requires that companies registering securities with it (and when filing its periodic reports) reconcile EBITDA to net income in order to avoid misleading investors.

http://en.wikipedia.org/wiki/Earnings_before_interest,_taxes,_depreciation_and_amortization


EV/EBITDA
From Wikipedia, the free encyclopedia

EV/EBITDA is a valuation multiple that is often used in parallel with, or as an alternative to, the P/E ratio.

An advantage of this multiple is that it is capital structure-neutral. Therefore, this multiple can be used for direct cross-companies application.

Often, an industry average EV/EBITDA multiple is calculated on a sample of listed companies to benchmark against. An index now exists providing an average EV/EBITDA multiple on a wide sample of transactions on private companies in the Eurozone (Argos Soditic index).

The reciprocate multiple EBITDA/EV is used as a cash return on investment.

http://en.wikipedia.org/wiki/EV/EBITDA

Is QL Resources in for more M&As?

Monday August 30, 2010

Is QL Resources in for more M&As?

By LEE KIAN SEONG
lks@thestar.com.my

Market is concerned about firm’s financial capability, the prospects of its local and regional expansion

QL Resources Bhd, which announced its merger and acquisition (M&A) exercise last Monday, has been in the spotlight as there is wide speculation going around that the company might be pursuing more M&As going forward.

QL managing director Chia Song Kun said last Tuesday that the company would look into more M&As if there was something in the market that could benefit the company.

However, the questions are: Is the company able to pursue further M&As with its current financial capability and what are the earnings prospects going forward given its aggressive expansion plans locally and regionally?

According to Bloomberg data, the company’s market capitalisation stands at RM1.81bil. Its share prices have risen 40.3% to RM4.56 year-to-date.

The company announced its acquisition of a 23.29% stake in rival company Lay Hong Bhd for total consideration of RM11.6mil last Monday.

Lay Hong is mainly involved in the production of eggs, broiler farming and feedmill activities. It has also ventured into retail business in Sabah and currently operates eight supermarkets under the trade name G*MART.

Meanwhile, QL is a diversified resource and agricultural-based group with three core principal activities – marine products, manufacturing, integrated livestock farming and crude palm oil milling.

The acquisition of Lay Hong, which is in similar businesses, will enable QL and Lay Hong to achieve synergies from feed raw material sourcing arrangements, supply chain networks and operations efficiency.

Kenanga Research is factoring seven months of contribution from the new associate or RM1.7mil for the financial year ending March 31, 2011 (FY11) and another RM2.8mil for FY12 in its forecast.

QL has set aside RM400mil over the next two years to expand its poultry, fishing and oil palm planting businesses.

The company is expanding its business in Vietnam and Indonesia, with investment of US$10mil and US$20mil respectively. It is also investing about RM25mil to build biogas and biomass plants at its Sabah palm oil mill to turn waste into green energy.

It will also spend US$15mil to install a mill for its East Kalimantan oil palm estates.

It was reported last year that the company aimed to triple its profit contribution from palm oil operations by 2015 as it was bullish about the long-term growth outlook for the commodity.

Despite the high capital expenditure going forward, the company said it would continue to pay out 25% to 30% of the group profits as dividends. The market is concerned whether QL can really maintain this policy with such expansion plans.

An analyst from a local brokerage said QL’s management had shown its interest in M&A and always kept its options open.

However, it is hard to judge whether the company would undertake M&A activities soon.

“It would probably acquire layer farms rather than listed entities. With its net profit of over RM100mil a year, the acquisition of layer farms, is possible and the company has been doing that for many years,” she said.

She said given the gearing level of about 0.6 times with a large portion of it for feed trading business, the company still had plenty of room to take up more loans.

“QL has very strong free cashflow generation and I don’t see a problem for it to finance their acquisition. It also has good track record in getting loans,” she said.

According to QL’s annual report, its cash and cash equivalents as at the end of FY10 stood at RM106.1mil, compared with RM68.3mil a year ago. Its loans and borrowings stood at RM215.4mil in FY10, compared with RM163.1mil in FY09.

Another analyst from a local research house said she did not expect QL to conduct further M&A activities in the near-term as the company was now actively expanding its businesses.

“If it is looking for M&A, it might be in the Phase II expansion in its Surabaya plant. It might want to explore opportunities for value-added products and look for acquisition in this area or start a greenfield project.

“However, it would not happen in the near term,” she said.

She said the company would have banks lined up for its expansion or acquisition funding.

On its earnings prospects, Kenanga Research raised QL’s FY11 net profit forecast by 6.3% and 6.6% for FY12 to account for the stronger surimi prices, crude palm oil prices and new earnings stream supported by improving economic conditions.

OSK Research said the construction of QL’s Surabaya surimi plant and day-old chick breeder farm as well as Vietnam livestock farm had begun and the units were expected to start contributing in FY12.

“We are somewhat positive on the expansion in Indonesia and Vietnam as they will boost revenue of its marine products manufacturing segment and Vietnam layer farm by 16.5% and 3.1% respectively, taking into account the time taken to ramp up capacity and production,” the research house said.

OSK likes QL’s resilient business as well as strong management team, which will continue to drive growth in all its three core segments.

It reiterates its “buy call” on QL, given the 13% price upside on the stock.

QL posted slightly higher net profit of RM26.8mil in the first quarter ended June 30, compared with RM22.3mil in the same period last year.

Its revenue was lower at RM356.34mil, compared with RM364.49mil previously.

For FY10, QL registered a net profit of RM115.1mil, 19% higher than RM96.7mil in FY09. Its revenue rose 5.7% to RM1.48bil.

http://biz.thestar.com.my/news/story.asp?file=/2010/8/30/business/6926466&sec=business

Free Cash Flow (FCF) = EBITDA - Capex

The net Free Cash Flow is free cash flow less interest and other financing costs and taxes.

In this approach, FCF is defined as EBITDA (earnings before depreciation, interest and taxes) less capital expenditures.

Capital expenditure encompass all capital spending, whether for maintenance or expansion and no changes in working capital are considered.

Information obtained through analysis of cash flow statement.

Through analysis of individual cashflows, investors and creditors can examine the following characteristics of a business:

1.  Whether financing is internally or externally generated.
2.  Whether the firm is able to cover all debt obligations.
3.  Whether the firm is able to afford expansion.
4.  Whether the firm is able to pay dividends.
5.  Whether the firm has financial flexibility.

Boustead 2Q net profit surges 212% to RM146.

Boustead 2Q net profit surges 212% to RM146.

Written by Surin Murugiah
Tuesday, 24 August 2010 12:15


KUALA LUMPUR: Boustead Holdings Bhd’s net profit for the second quarter (2Q) ended June 30, 2010 surged 212% to RM146.5 million from RM46.9 million a year ago, mainly due to stronger palm oil prices and higher sales volume.

Its revenue for the quarter increased to RM1.42 billion from RM1.28 billion in 2009, with earnings per share (EPS) of 15.68 sen.

Boustead declared a second interim single tier dividend of 10 sen per share.

For the six months ended June 30, Boustead’s net profit jumped to RM236.7 million from RM107.8 million, on the back of a 20% increase in revenue to RM2.98 billion from RM2.49 billion in 2009. EPS came in at 25.45 sen.

In a statement yesterday, Boustead deputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin said most of its divisions had performed satisfactorily and had marked improvements compared with the previous financial year.

“Coupled with this, our focus on improving efficiencies and strengthening organic growth has indeed proved viable,” he said.

Lodin said the plantation division registered a significant increase in profit mainly due to positive crude palm oil (CPO) prices, while Boustead’s finance and investment division was the highest profit contributor for the six-month period, delivering a profit of RM105 million.

“The primary contributing factor was the recognition of gains from the disposal of BH Insurance Bhd for RM75 million. Furthermore, the improved results from the Affin Group and interest savings from Boustead’s level contributed to the division’s bottom line,” he said.

The heavy industries division closed the six-month period with a lower profit of RM49 million, compared with RM64 million during the same period last year, mainly due to lower progress billings.

The trading division’s profit for the first six months of 2010, totalling RM33 million, was a significant improvement from RM7.2 million for the same period last year, due to increase in sales volume driven by BH Petrol.

The property division’s profit of RM31 million for the six month period saw a decrease compared with RM40 million in the same period in 2009 due to a decline in contribution from property development activity, while the manufacturing and services division recorded a RM10 million profit.

Lodin said Boustead was bullish on the prospects ahead as the Malaysian economy was expected to fare much better in the second half of the financial year.

“Our divisions are at the forefront of the Malaysian economy and we expect to ride on this positive sentiment,” he said.

“In addition, we are optimistic of CPO prices trending upwards over the next few months due to adverse weather conditions, thinning supply and an increase in demand, especially in traditional markets around the world.”

QL Resources lays hands on rival

QL Resources lays hands on rival

Tags: Lay Hong Bhd | London Biscuits Bhd | QL Resources Bhd

Written by Koo Jie Ni & Chong Jin Hun

Tuesday, 24 August 2010 12:17

KUALA LUMPUR: The quiet poultry industry is seeing some “egg-citement” with new corporate developments. QL Resources Bhd yesterday acquired 11 million shares or 23.29% of Lay Hong Bhd in an off-market transaction. The identity of the seller was not disclosed but it is believed to be London Biscuits Bhd. All three players are in the food business. The common denominator in the three companies is the need for eggs, which is what Lay Hong offers. Founded in the 1970s and listed since October 1994, Lay Hong is mainly involved in the production of eggs, broiler farming and feedmill activities. It has also ventured into the retail business in Sabah and currently operates eight supermarkets under the trade name G*MART. QL Resources is principally involved in marine products manufacturing, livestock farming and oil palm cultivation. It is the country’s largest fishmeal manufacturer and the largest producer of surimi in Asia. It is a leading egg producer in the country with a daily production of 2.5 million eggs. London Biscuits, on the other hand, is a home-grown manufacturer of cakes and snack foods. According to QL Resources’ announcement to the stock exchange yesterday, it acquired the shares at RM1.05 apiece for a total of RM11.55 million. This values Lay Hong at RM48.55 million, and at a price-to-book value of just 0.52 times based on its latest net assets per share of RM2. Lay Hong’s shares have been rising steadily for the past year. They hit a 52-week low of 60 sen on Sept 18, 2009, and then climbed 117% to reach RM1.30 on July 27, 2010. Both Lay Hong’s and QL Resources’ shares gained four sen yesterday to close at RM1.19 and RM4.59, respectively. A source familiar with the matter said it was Lay Hong’s layer operations, feedmill activities, broiler contract farming and good brand name that sparked QL Resources’ interest. “Additionally, Lay Hong’s corporate results are good, and have grown over the years. Furthermore, QL Resources and Lay Hong are in similar businesses, hence the two companies may be able to achieve synergies from sourcing arrangements, marketing networks and operations,” he said. The source declined to say if QL Resources would increase its stake in Lay Hong or seek board representation. One of Lay Hong's egg-producing farm in Selangor For its fourth quarter ended March 31, 2010 (4QFY10), Lay Hong reported a net profit of RM1 million on the back of a RM95.06 million revenue. The net profit was 81% lower than that of a year earlier. The company said this was mainly due to lower selling prices of poultry products as well as additional provisions for doubtful debts and inventories. Notwithstanding the weaker fourth quarter, it is worth noting that Lay Hong’s full-year FY10 results showed a net profit of RM10.33 million, on revenue of RM388.75 million, a 46% climb from its net profit of RM7.09 million for FY09. While Lay Hong is off investors’ radar screens, QL Resources is a firm favourite among fund managers. The company recently announced a net profit of RM26.8 million, or 6.86 sen per share, for its first quarter ended June 30, 2010 (1QFY11). In July 2010, QL Resources was recognised by The Edge as one of the Top 10 Companies of the Year in The Edge Billion Ringgit Club, in recognition of its profit performance, shareholder value creation and corporate social responsibility. London Biscuits: Sale at a loss of two sen per share While the seller of the stake in Lay Hong has yet to be announced, it is believed to be London Biscuits, which had purchased a substantial interest in Lay Hong in November 2006. Based on Bursa Malaysia announcements, London Biscuits acquired a 20% stake or 9.24 million shares in Lay Hong, representing the bulk of its holding, in two tranches priced at RM1.01 and RM1.14 per share. At a weighted average price of RM1.07, this represents two sen more than the resale value to QL Resources, or an average loss of RM184,800 for the 20% stake. An additional 2.13 million shares were acquired in the open market thereafter. It is estimated that the trades were made at prices ranging from 89.5 sen to RM1.15 per share. Before the divestment, London Biscuits sold 100,000 shares of Lay Hong last month. According to calculations by The Edge Financial Daily, the company now holds 170,000 shares or a small 0.37% stake in Lay Hong, after the sale of its 11 million shares yesterday. According to a source, London Biscuits disposed of its investment in Lay Hong because it felt the business overlapped with its investment in poultry farmer and feed manufacturer TPC Plus Bhd. London Biscuits emerged as a substantial shareholder in TPC in March this year after acquiring a 32% stake or 25.6 million shares for RM7.7 million. A month later, London Biscuits made a voluntary takeover offer for the remaining 54.4 million shares in TPC at 30 sen each or a total of RM16.32 million. It was conditional upon London Biscuits obtaining more than 50% of TPC. The takeover lapsed in June as it failed to secure over 50% of TPC’s shares. Its total interest stood at 46.99% at the close of the offer period. In its quarterly results for the three months ended March 31, London Biscuits registered a net profit of RM4.03 million on the back of revenue of RM50.92 million. Revenue grew by 7% while net profit fell by 12% from the previous corresponding period. The movement was mostly due to the income tax of RM544,000 charged to the company in 3QFY10, whereas in 3QFY09, it reported a tax refund of RM683,000. The company did not offer any explanation for the year-on-year change in performance. London Biscuits closed at RM1.16 yesterday, down four sen. This article appeared in The Edge Financial Daily, August 24 2010.

More acquisitions by QL abroad?

More acquisitions by QL abroad?

Tags: Chia Song Kun | Indonesia | Lay Hong Bhd | organic growth | QL Resources Bhd | Vietnam

Written by Chong Jin Hun

Wednesday, 25 August 2010 15:25

SHAH ALAM: QL Resources Bhd is looking to more “egg-citing” times ahead. Having acquired a controlling stake in a local egg-producing rival, the spotlight now falls on QL Resources’ overseas expansion as it pursues organic growth, and positions itself for potential acquisition opportunities. The major food player, which produces marine products, undertakes poultry farming as well as oil palm plantation operations, expects to register its maiden foreign income from Indonesia and Vietnam in the next financial year ending March 31, 2012 as the company’s operations in these countries take shape. “It’s not necessarily (acquisition of listed companies abroad),” QL Resources managing director Chia Song Kun told reporters at the company’s shareholders’ meeting here yesterday. “It’s too early to give figures,” he added, when asked about the level of foreign income contribution QL Resources hoped to achieve in the future as its overseas expansion gained further momentum. Chia, whose company is Malaysia’s largest egg producer with a 20% market share, said the firm would continue to look at acquisition opportunities abroad as long as there was a strategic fit with its core operations. On Monday, QL Resources announced it had acquired 11 million shares or 23.29% of rival Lay Hong Bhd for RM11.55 million or RM1.05 a share via an off-market transaction. The stake was acquired from London Biscuit Bhd (see related article). At RM1.05 per Lay Hong share, the acquisition price translates into 0.52 times its net assets per share of RM2 as at March 31, 2010, and a trailing price-earnings ratio of just 4.7 times. News of the acquisition created some “egg-citement” for the sector, sending the stocks of both companies to fresh highs yesterday. Lay Hong was the top performer on the local bourse yesterday, surging as much as 61 sen or 51.2% to RM1.80, its highest in over nine years since April 2001. The stock closed at RM1.73 for a gain of 53 sen. Apart from expanding its core businesses through acquisitions, QL Resources may also evolve into an independent power producer with its palm biomass pelletising project, says managing director Chia Song Kun That means QL Resources is already sitting on a “paper gain” of 65% for a one-day investment. QL Resources said the purchase was a good investment which could result in potential synergy between the two entities. An industry source told The Edge Financial Daily that QL Resources saw potential synergy between itself and Lay Hong. This is by virtue of Lay Hong’s layer, broiler and feedmeal operations. The source added that QL Resources also took note of Lay Hong’s financials, and foresees synergistic opportunities in the areas of sourcing, marketing network and operational efficiency. According to him, it is still too early to say if QL Resources would request for a board seat in Lay Hong. For now, it is also uncertain if the acquirer intends to raise its stake in Lay Hong, the source said. Analysts sees strong earnings for QL Resources Analysts said QL Resources’ recently released first-quarter results were within their and consensus estimates. They added that the group was likely to register strong numbers in the years ahead as it begins harvesting the fruits of its expansion. OSK Research Sdn Bhd analyst Law Mei Chi said: “We like QL Resources’ resilient business as well as strong management team, which will continue to drive growth in all its three core segments.” Its marine products division involves deep-sea fishing and the production of surimi-based or fish paste products. The company has factories across Malaysia — in Perak, Johor  and Sabah — as well as Indonesia. The company is also engaged in poultry farming with broiler, breeder and layer operations in Kedah, Selangor, Negri Sembilan, Sabah and Sarawak. It also runs poultry farms in Indonesia and Vietnam. Broilers are bred for meat while breeder and layer operations involve the production of eggs for hatching and consumption purposes, respectively. QL Resources owns some 1,200ha of oil palm plantation in Sabah and 20,000ha in Kalimantan where the company plans to buy more oil palm tracts. TA Securities Holdings Bhd wrote in a note: “Going forward, we expect QL Resources’ growth to remain strong thanks to its experience in manoeuvring the business into profitability even during economically challenging periods. “Although management usually earmarks 10%-15% annual growth, however, we believe QL Resources could comfortably grow at more than 20% in FY12.” TA and OSK have maintained their buy calls on QL Resources with fair values of RM5.30 and RM5.20, respectively. QL Resources’ net profit rose by 20.1% to RM26.8 million, or 6.86 sen a share, in the first quarter ended June 30, 2010,  compared with RM22.32 million, or 5.69 sen a share, previously. Revenue grew 7.9% to RM384.51 million from RM356.34 million. As at June 30, 2010, its net assets per share stood at RM1.35. The company had cash of RM70.72 million and debts of RM401.42 million. This translates into a net debt position of RM330.7 million, or a net gearing of 0.6 times based on the company’s equity of RM526.66 million. Yesterday, its shares advanced as much as nine sen or 2% to RM4.68 before settling unchanged at RM4.59. QL Resources’ Chia told The Edge Financial Daily in an interview in June that the company was setting aside up to RM600 million for capital expenditure (capex) in the current and next two financial years, as it pursued organic expansion and  acquisitions. The company is expected to earmark some RM200 million in the current financial year (FY) ending March 31, 2011,  while FY12 and FY13 may each see capex allocations of between RM150 million and RM200 million. According to Chia, about 40% of the planned capex for the three years is intended to finance expansion of the group’s plantation business which involves downstream projects, including the commercialisation of palm biomass as a source of renewable energy. QL Resources’ marine products, and poultry farming units will each be allocated 30% from the planned budget which would be financed via the group’s internally-generated funds or bank loans. Chia said the company may also raise money via a private placement of new shares, or bond issues. QL Resources to evolve into an IPP? QL Resources’ palm biomass project may potentially see the company evolve into an independent power producer (IPP). Chia said excess electricity generated from the company’s palm biomass pelletising project could be sold to state-owned utility Tenaga Nasional Bhd. “This concept is not green IPP yet,” he said. Last Wednesday, the company said it had finalised the pre-commercialisation stage of the renewable energy project.  This step enables the company to start commercialising the empty fruit bunch-based pellet, via the 40,000-tonne per year plant within its palm oil mill in Tawau, Sabah. QL Resources’ renewable energy initiative essentially uses palm oil mill effluent to generate methane. This in turn is used to generate electricity for the production of the pellets, deemed an alternative source of fuel to hydrocarbons such as coal. The zero-waste renewable energy project, which constitutes a part of the company’s bigger plan to develop palm biomass renewable energy business in Malaysia and Indonesia, will start operations by year-end. QL Resources is certainly moving forward. The company is not only expanding its integration processes within its core surimi, poultry and palm oil divisions, but also extending its tentacles to complementary and offshoot businesses, such as biomass energy.    This article appeared in The Edge Financial Daily, August 25 2010.

Glovemakers slide further on more negative developments

Glovemakers slide further on more negative developments

Written by Loong Tse Min
Thursday, 26 August 2010 15:29


KUALA LUMPUR: Malaysian-listed latex glovemakers’ shares continued to slide yesterday as investors’ concerns on the industry’s prospects appear to intensify this week.

Most glovemakers have been falling so far this week with the world’s second-largest latex glovemaker Supermax Corp Bhd losing about 8% over three trading days to end at RM5.07 yesterday.

Over the last three trading days, Hartalega Holdings Bhd lost 31 sen or 3.9% to close at RM7.63 yesterday, Kossan Rubber Industries Bhd fell 23 sen or 6.35% to RM3.39, Latexx Partners Bhd was down 26 sen or 7.71% to RM3.11, Adventa Bhd shed eight sen or 3.03% to RM2.56 and Rubberex Corp (M) Bhd was down 5.5 sen or 5.73% to 90.5 sen.

The world’s largest latex glovemaker Top Glove Corp Bhd put on 11 sen or 1.8% to RM6.16 over Monday and Tuesday but fell 10 sen or 1.62% to RM6.06 yesterday.

The long list of concerns over the industry was raised about a month ago, which was also highlighted by The Edge Financial Daily.

These include potential overcapacity, record-high latex prices, the appreciation of the ringgit, a potential cut in Malaysian gas subsidies and possibly slower demand ahead due to the economic slowdown and easing H1N1 influenza fears.

The latest developments that seem to support these concerns include the ringgit’s further strengthening, more signs of a slowing US economy and continued high rubber prices.

Following Bank Negara Malaysia’s foreign exchange liberalisation moves, the ringgit reached it highest levels in 13 years at RM3.1320 on Monday. In the US, the deluge of bad economic data continued. On Monday, investors were spooked by data showing that existing home sales for July plunged a record 27%.

Meanwhile, rubber prices continue to hold firm, despite the recent fall in the price of palm oil and other commodities. Standard Malaysian Rubber general purpose FOB current month was priced at RM9.84 per kg yesterday, the highest since May 5.

Among glovemakers, Supermax fell the most yesterday, down 16 sen or 3.06% to RM5.07, as CIMB Research warned yesterday that the company may report a quarter-on-quarter (q-o-q) earnings contraction for its second fiscal quarter. The company is expected to release its results today.

However CIMB Research, which has a buy call on Supermax, defended the stock saying, “We are not worried about the potential q-o-q earnings contraction as this is not the first time glove manufacturers are facing this situation. From our checks, demand for rubber gloves remains healthy and Supermax continues to operate at almost 90% utilisation, supporting our view of sufficient pricing power that will allow glovemakers to pass on any cost increases.”

At the same time, some institutional buyers appear to be nibbling in glovemaker stocks at their current low prices.

This article appeared in The Edge Financial Daily, August 26 2010.

Genting posts record 2Q profit, thanks to S’pore

Genting posts record 2Q profit, thanks to S’pore

Written by Max Koh
Friday, 27 August 2010 13:59

KUALA LUMPUR: Lady Luck is smiling on Genting Bhd.

The group posted its highest quarterly pre-tax profit ever of RM1.59 billion for the second quarter ended June 30, 2010 (2QFY10), up 179% from RM570.45 million a year earlier, boosted by the newly opened Singapore operations.

Its net profit jumped 244.6% to RM739.17 million for the quarter, from RM214.49 million a year earlier. Revenue doubled to RM4.09 billion from RM2.1 billion, while earnings per share improved to 20 sen from 5.8 sen. It also declared a dividend of 3.3 sen per share for 1H10.

Genting said the increase in revenue and profitability came mainly from its leisure and hospitality division with the commencement of the Resorts World Sentosa operations in Singapore.

Within the leisure and hospitality division, its Singapore operations contributed RM2.03 billion in revenue, compared with RM1.2 billion from Malaysia, and RM250 million from UK and others. Another RM607.6 million in revenue came from its power, plantation, property and investment divisions.

The Singapore operations contributed a pre-tax profit of RM1.19 billion for the quarter, compared with RM592.3 million from Malaysia. This gave the Singapore operations a higher pre-tax profit margin of 58.6% versus 49.3% for Malaysia.

“The improved revenue from Resorts World Genting is mainly due to better luck factor in the premium players business. The UK casino business in 2QFY10 also benefited from an increase in business volume. However, the weaker pound translated to lower casino revenue in ringgit terms,” it said in a filing with Bursa Malaysia.

The group’s plantation arm, Genting Plantations Bhd, also saw higher revenue and profit due to higher palm products prices and increased fresh fruit bunch (FFB) production.

However, the group’s power division, Genting Energy Ltd, recorded lower revenue due to lower generation of electricity by the Meizhou Wan power plant in China.

“The oil & gas division also posted lower revenue and profit, as a result of lower share of entitlement in China despite higher average oil prices achieved, as well as higher expenses incurred. The share of results in jointly controlled entities and associates increased in 2Q10, as the results in 2Q09 was impacted by the share of loss in a jointly controlled entity in Genting Singapore Plc arising from lower property valuation of a property in London,” Genting said.

For the first half ended June 30, 2010, the group posted RM971.6 million in net profit on the back of RM7.2 billion in revenue, due to higher contribution from the leisure and hospitality, plantation and property divisions.

The period also saw a net impairment loss of RM1.3 billion and net dilution gain of RM436.3 million, which arose from the company’s shareholding in Genting Singapore, when the remaining S$450 million convertible bonds were fully converted into new ordinary shares of Genting Singapore in 1H10.

“The net fair value gain on derivative financial instruments of RM67.9 million was mainly in respect of Genting Singapore’s fair value gain on derivative financial instruments from the valuation of the conversion option embedded in the convertible bonds,” it said.

For the rest of the year, the group said it was cautiously optimistic as regional competition continued to impact its performance, with better contribution from its Singapore operations.

“With the opening of Marina Bay Sands, Resorts World Sentosa’s business showed resilience and its business model displayed impressive strength.

“It would continue to make improvements to its attractions, facilities and infrastructure to meet the expectations of its valued guests,” Genting said, adding that construction of its West Zone had started and was expected to commence operations next year.

On Wednesday, CIMB Research maintained its outperform call on Genting with the target price raised to RM10.90 from RM9.40. It also raised its FY10-12 earnings per share (EPS) for Genting by 27%-32%.

“The past two months have seen a slew of activities within the Genting group. While the UK asset transfer is largely neutral for the parent Genting Bhd, Genting Malaysia’s winning bid for the Aqueduct racino and our significant earnings upgrade for Genting Singapore following a stellar 2Q10 for Resorts World Sentosa are positive,” it said.

While remaining neutral on Genting Malaysia, CIMB said it was bullish on Genting Singapore due to its strong results.

“The key winner to emerge from these developments is Genting Singapore. The sale of its UK asset will allow management to concentrate on its flagship property, Resorts World Sentosa. More importantly, its strong 2QFY10 results thumped all expectations and stamped Genting Singapore’s mark as Singapore’s gaming market leader in 2Q,” it added.

Genting gained one sen to close at RM9 yesterday with 6.2 million shares traded.


This article appeared in The Edge Financial Daily, August 27 2010.

Nestle’s 2Q net profit rise 17%, declares 50 sen interim dividend

 Nestle’s 2Q net profit rise 17%, declares 50 sen interim dividend

Written by Yong Min Wei
Friday, 27 August 2010 13:48

KUALA LUMPUR: Nestle (M) Bhd’s net profit for the second quarter ended June 30, 2010 (2QFY10) rose 17.2% to RM100.15 million from RM85.45 million a year ago, underpinned by marketing activities and new product launches that leveraged on improved economy and consumer sentiment.

In a filing to Bursa Malaysia Securities yesterday, the group said revenue for 2QFY10 grew 13.9% to RM1.05 billion from RM922.85 million with overall businesses performing well in this quarter, coupled with the strong growth of Nestle Liquid Drinks and Chilled Dairy.

“Another positive note is the robust double-digit growth which was registered by the exports business. The significant investment in production lines over the last three years has made additional capacity readily available to cater to the higher external demand, regionally as well as globally,” Nestle said.

It added that the strong economic performance by neighbouring countries, in particular Indonesia and the Philippines, also contributed to the higher exports for the quarter.

The group posted earnings per share of 42.71 sen for 2QFY10 versus 36.44 sen previously. Its net asset per share stood at RM2.47 as at June 30.

Nestle’s board of directors declared an interim dividend of 50 sen per share in respect of its financial year ending Dec 31, 2010, under the single-tier dividend which is not taxable in the hands of shareholders. The dividend would be paid to shareholders on Oct 5.

For its six months ended June 30, 2010 (1HFY10), the group’s net profit climbed 28.6% to RM238.95 million from RM185.8 million in the same half last year, mainly driven by timing of overhead cost and the favourable leverage of the fixed cost structure.

The group reported revenue of RM2.07 billion year-to-date, an 8.6% gain from RM1.9 billion in the previous comparable half.

Nestle noted that while some commodity prices such as cocoa powder and skimmed milk powder increased sharply during the half year, the stronger ringgit against US dollar helped partially cushion these increases.

In a media statement, Nestle managing director Peter R Vogt said: “With our domestic sales benefiting from the improved local economy and the increase in consumer confidence, along with export levels, we are able to post a strong improvement over last year’s performance.”

Vogt said that the group would continue to make investments in line with its objective of being the leader in nutrition, health and wellness, as well as an industry benchmark for its financial performance and trusted by all stakeholders.

“Despite the concerns over the sovereign debt issue in the eurozone and the sustainability of the economic recovery in the US, the outlook in BRIC countries (Brazil, Russia, India and China) and the Asean economies are still positive,” he said.

Nestle’s share price yesterday closed unchanged at RM39.48 with 11,400 shares traded.


This article appeared in The Edge Financial Daily, August 27 2010.

Namewee might be charged in court!!!

Sin Chew Daily reported that controversial rapper Wee Meng Chee, better known as Namewee, might be charged in court over his latest short film which condemned the principal who allegedly made racist statements. The daily quoted Prime Minister Datuk Seri Najib Tun Razak as saying that if the related authority had enough evidence, Wee could be charged.
However, Wee told the daily that the two school principals who allegedly made racists comments were supposed to be sued instead.
He explained that his short film was made in a positive manner as he disliked racism.

http://thestar.com.my/news/story.asp?file=/2010/8/30/nation/6943653&sec=nation

Fees Matter

http://www.lfadvisors.com/investment-philosophy/

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Types of Investors

There are different styles and types of investors that exist in the stock market. Investors use the stock market to build their investment portfolio so that they can see a long term profit that takes place over a long period of time.

Someone who is just using the stock market to make money quickly for a short period of time is called a "trader". Members of an investment group fall into the first category: they are in the investment market for the long haul.

There are different types of investors that use different methods to analyze the market and the market conditions.

These three methods of analyzing the market are:


1. Technical analysis . This method of analysis is used by a "momentum" investor. Technical analysis looks at the price fluctuations that occur in the stock market. The investor bases the decision to buy or sell on what he feels the price will do next.


2. Fundamental analysis #1 . Fundamental analysis is used by the "growth" investor. This type of analysis decides if a certain company is a good investment based on the earnings of the company, growth sales, and margins of profit.

3. Fundamental analysis #2. A "value" investor uses this type of analysis. This method of analysis is similar to the analysis that a growth investor uses but is slightly different. A value investor takes a close look at those companies in the stock market that have a low value. The investor looks at stocks that are currently cheap and low but that have the potential to make a good comeback.

Most stock investment clubs use the fundamental method of analysis to make most of their investing decisions.

They find companies that are listed on the stock market that show good growth, profit, and earnings but that are still cheap to buy and haven’t yet reached their potential.

Members of the investment club buy this stock and hold on to it for several years so long as the fundamentals, as listed previously, continue to hold strong. This type of investment strategy is called "buy and hold".

http://www.investmentclubhelp.com/Types_of_Investors.html

Soros & Buffett Investment Rules

Sunday, April 23, 2006 | 07:33 AM

in Apprenticed Investor | Investing

 

On the face of it, Buffett and Soros investment styles seem to have little in common. A new book suggest that both practice the same mental habits and strategies. They share similar beliefs about the nature of the markets.
In "The Winning Investment Habits of Warren Buffett and George Soros," its author outlines their 23 "winning" investment habits - tactics and strategies that he believes other investors can learn from. Many of these "habits" seem to fly in the face of conventional Wall Street wisdom: for example, Buffett and Soros do not diversify. And when they buy, they always buy as much as they can. Both will say that making predictions about the market or economy has virtually nothing to do with investment success.
Here's the list of 23 habits:

A master investor:

1. Believes the first priority is preservation of capital.
2. As a result, is risk-averse.
3. Has developed his own investment philosophy, which is an expression of his personality. As a result, no two highly successful investors have the same approach.
4. Has developed his own personal system for selecting, buying and selling investments.
5. Believes diversification is for the birds.
6. Hates to pay taxes, and arranges his affairs to legally minimise his tax bill.
7. Only invests in what he understands.
8. Refuses to make investments that do not meet his criteria. Can effortlessly say 'no'.
9. Is continually searching for new investment opportunities that meet his criteria and actively engages in his own research.
10. Has the patience to wait until he finds the right investment.
11. Acts instantly when he has made a decision.
12. Holds a winning investment until a pre-determined reason to exit arrives.
13. Follows his own system religiously.
14. Is aware of his own fallibility. Corrects mistakes the moment they arise.
15. Always treats mistakes as learning experiences.
16. As his experience increases, so do his returns.
17. Almost never talks to anyone about what he's doing. Not interested in what others think of his investment decisions.
18. Has successfully delegated most, if not all, of his responsibilities to others.
19. Lives far below his means.
20. Does what he does for stimulation and self-fulfilment - not for money.
21. Is emotionally involved with the process of investing; but can walk away from any individual investment.
22. Lives and breathes investing, 24 hours a day.
23. Puts his money where his mouth is. For example, Warren Buffet has 99 per cent of his net worth in shares of Berkshire Hathaway; George Soros, similarly, keeps most of his money in his Quantum Fund. For both, the destiny of their personal wealth is identical to that of the people who have entrusted money to their management.

Interesting stuff . . .
>
Source:
Inside the strategy of Soros and Buffett
JENNIFER HILL
The Scotsman, Sat 8 Apr 2006
http://business.scotsman.com/index.cfm?id=538662006
Becoming Rich : The Wealth-Building Secrets of the World's Master Investors Buffett, Icahn, Soros
Mark Tier
St. Martin's Press (April 1, 2005)
http://www.amazon.com/exec/obidos/ASIN/0312339860/thebigpictu09-20/

Charlie Munger's 10 Rules for Investment Success

By Morgan Housel
December 13, 2007

  Those of you lucky enough to attend a Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) annual shareholder meeting have undoubtedly heard Charlie Munger say, "I have nothing to add."
In reality, the guy has quite a bit to add. Thankfully for us, Munger is almost as forthcoming with his investment thoughts as his pal Warren Buffett. In his must-read book, Poor Charlie's Almanac, Munger puts forth a 10-step checklist that even the most inexperienced investors could benefit from.
 
1. Measure risk All investment evaluations should begin by measuring risk, especially reputational.
It's crucially important to understand that from time to time, your investments won't turn out the way you wanted. To protect your portfolio, don't set yourself up for complete failure in the first place. Giving yourself a large margin of safety, avoiding people of questionable character, and only taking on risk when you can be sure you'll be satisfactorily rewarded are all steps in the right direction. Companies like Chipotle (NYSE: CMG) might have perfectly bright futures, but when their shares are priced for perfection, they might nonetheless prove too risky for savvy investors.
 
2. Be independent Only in fairy tales are emperors told they're naked.
With stockbrokers often rewarded for activity, not successful investments, it's critically important to make sure you believe that what you're doing is right. Chasing others' opinions may seem logical, but investors like Munger and Buffett often succeed by going against the grain. Big Berkshire investments such as Coca-Cola (NYSE: KO), and more recently Petrochina (NYSE: PTR), were largely ignored by the masses when they were first made.
 
3. Prepare ahead The only way to win is to work, work, work, and hope to have a few insights.
It shouldn't surprise you that the best investments aren't the ones we typically read about in the paper. The diamonds in the rough are out there, but finding them requires effort. Buffett reads thousands of annual reports to cultivate ideas -- even if he only comes up with a few candidates each year. Munger advocates a constant curiosity for nearly everything in life. If you never stop asking the "whys" in what you do, you won't have trouble staying motivated.

 

4. Have intellectual humility Acknowledging what you don't know is the dawning of wisdom.
Perhaps most crucially to Berkshire's success, its leaders never stray away from their comfort zones. In investing, a clear idea of what the business will look like in the future counts most. If you struggle to comprehend what the business does today, you might as well be throwing darts. While companies like Google (Nasdaq: GOOG) and Boston Scientific (NYSE: BSX) are certainly titans in their own right today, they might look drastically different in five to 10 years.

5. Analyze rigorously Use effective checklists to minimize errors and omissions.
The numbers don't lie. When researching investments, Buffett and Munger like to try to estimate the security's worth before they even look at its price. They are businessmen, not stock-market junkies. They focus their brainpower on the value of businesses, not convoluted economic forecasts or intricate market-timing techniques. Munger is incredibly brilliant, but the analytical rigor of his investment decisions is based around simplicity, not complexity.

6. Allocate assets wisely Proper allocation of capital is an investor's No. 1 job.
In the early days of Munger's investment partnership, he held very few securities. When good ideas came, he poured significant capital into them; otherwise, he simply enjoyed the California sun. The amount of money employed in each of your investments should relate directly to its attractiveness. When you find a great investment, don't be afraid to bet big on it. 

7. Have patience Resist the natural human bias to act.
Munger said it best himself: "Half of Warren's time is sitting on his ass and reading; the other half is spent talking on the phone or in person to a highly gifted person that he trusts and trust him." While it can be tempting to jump in and out of the market, true fortunes are made from big commitments in quality companies, held indefinitely. When you're done with that, find a hobby. Spending all day watching stock tickers won't do you much good. 

8. Be decisive When proper circumstances present themselves, act with decisiveness and conviction.
This also goes back to not following the herd. When others are jubilant, you should be scared, and vice versa. Don't let others' emotions sway you; the market masses should help you find opportunities in their absence, not guide you down their own path to mediocrity. 

9. Be ready for change Accept unremovable complexity.
Investing success requires us to accept inevitable changes. Munger and Buffett hated railroads for decades, but as the times changed, they threw their old thoughts out the door and invested billions. The world around us won't always conform to our preferences and prejudices, and sometimes our best ideas will prove incorrect. If you aren't willing to roll with a changing market, you may find yourself fighting a lost cause.

10. Stay focused Keep it simple and remember what you set out to do.
In chasing little, unimportant things, we often overlook huge and critical factors. But by keeping it simple, we can fixate on what really matters: buying good companies at a good price, and holding them until they're fully priced.
Charlie Munger often gets overshadowed by his more famous partner, but don't assume that's any reflection of Munger's own genius. He's undoubtedly been a guiding light for Buffett himself, and by any count, he should go down as one of the greatest investors of all time.

For related Munger-esque Foolishness:

• Munger on Human Misjudgements
• The Best of Charlie Munger
• Munger Goes Mental

http://www.fool.com/investing/general/2007/12/13/charlie-mungers-10-rules-for-investment-success.aspx

OSK Research maintains Buy on Tenaga, FV RM9.90

OSK Research maintains Buy on Tenaga, FV RM9.90

Written by OSK Research
Wednesday, 25 August 2010 08:45


KUALA LUMPUR: OSK Research is keeping its earnings forecast for TENAGA NASIONAL BHD [] intact and maintains its Buy call on the power giant and its discounted cashflow fair value of RM9.90

The research house said on Wednesday, Aug 25 that with the ringgit strengthening to RM3.13 versus the US dollar and Australian coal prices falling back to US$86 per tonne from a recent high of US$108 per tonne, there has been some buying interest on TNB.

“Nonetheless, given the volatility of coal prices, we are keeping our effective cost of coal for FY11 and beyond unchanged at US$98 per tonne. With our earnings intact, we maintain our Buy call on Tenaga and our DCF fair value of RM9.90,” it said.

Tenaga announced on Tuesday it has received a letter of offer from the Energy Commission (EC) to develop the 1x1000MW coal fired power plant on Tenaga’s existing power plant site in Manjung, Perak.

The plant is expected to have its commercial operation date on March 1, 2015 and still has to secure approvals for its environmental impact assessment, power purchase agreement and bidding selection for the engineering, procurement and commissioning contractor.

http://www.theedgemalaysia.com/business-news/172439-osk-research-maintains-buy-on-tenaga-fv-rm990.html

CIMB Research ups CI Holdings target price to RM4.20

CIMB Research ups CI Holdings target price to RM4.20

Written by CIMB Equities Research
Thursday, 26 August 2010 08:53

KUALA LUMPUR: CIMB Equities Research said CI Holdings’ (CIH) record FY6/10 net profit of RM38 million exceeded its forecasts and consensus estimates by 6%.

The research house said on Thursday, Aug 26 that it had underestimated CIH’s sales volume growth which kept going, even after the Chinese New Year selling campaign. Another pleasant surprise was the full-year DPS of 11 sen, higher than its forecast of 10 sen.

“We raise our EPS forecasts by 5.5% for FY11 and 9.5% for FY12 for higher sales assumptions. We also up our DPS forecast from 11 sen to 12 sen for FY11.

“Our target price goes up from RM3.90 to RM4.20, pegged to an unchanged 20% discount to our 15x target market P/E in view of the stock’s relatively low liquidity. CIH remains firmly a BUY,” it said.

http://www.theedgemalaysia.com/business-news/172523-cimb-research-ups-ci-holdings-target-price-to-rm420.html

F&N to subscribe 23.08% new Cocoaland shares at RM1.38 each

F&N to subscribe 23.08% new Cocoaland shares at RM1.38 each

Tags: Cocoaland | Fraser & Neave Holdings | new shares
Written by Joseph Chin
Thursday, 26 August 2010 11:45


KUALA LUMPUR: Fraser & Neave Holdings Bhd will subscribe for 39.5 million new COCOALAND HOLDINGS BHD [] shares or 23.08% at RM1.38 each.

This was sharply below Cocoaland’s last traded price of RM2.87, based on the announcement made by Cocoaland on Thursday, Aug 26. The acquisition of the shares would amount to RM54.64 million.

“The issue price of RM1.38 was arrived on a negotiated basis,” said Cocoaland. The issue price represents a price-to-book ratio of approximately 1.64 times and 1.57 times over the audited and unaudited consolidated net assets per share of Cocoaland of RM0.84 as at Dec 31, 2009 and 88 sen as at March 31, 2010 respectively.

“Having considered the rationale for the proposed subscription and the benefits from the entry of F&N as a key shareholder of Cocoaland, the board is of the opinion that the issue price is reasonable to Cocoaland,” it said.

Cocaland said the board believed this strategic tie-up with F&N will broaden the group’s growth prospects as well as open new horizons in terms of brand building, product and market development for Cocoaland Group.

“The board opines that having F&N as a strategic shareholder will generate greater shareholder value for Cocoaland,” it said.

http://www.theedgemalaysia.com/business-news/172534-fan-to-subscribe-2308-new-cocoaland-shares-at-rm138-each.html

Supermax 2Q earnings jump 77.9% to RM45.8m

Supermax 2Q earnings jump 77.9% to RM45.8m

Written by Joseph Chin
Thursday, 26 August 2010 13:36
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KUALA LUMPUR: Supermax Corp Bhd posted RM45.85 million in earnings in the second quarter ended June 30, up 77.9% from RM25.78 million a year ago, underpinned by strong revenue growth, cost savings and productivity.

The glove maker said on Thursday, Aug 26 group revenue rose by 24.6% or RM46.34 million to RM234.82 million from RM188.48 million a year ago, on the back of strong global demand for rubber gloves as well as higher selling prices.

“However, despite a challenging operating environment, the group did well to record profitability growth over the corresponding quarter a year ago,” it said.

Supermax said profit before tax and profit after tax rose by 55.8% (RM17.5 million) and 77.9% (RM20.1 million) respectively. The improvement in profitability is attributed to the revenue growth as well as cost savings from higher efficiency and productivity from improved processes and refurbished lines.

It declared dividend of 2.5 sen a share.

http://www.theedgemalaysia.com/business-news/172547-supermax-2q-earnings-jump-779-to-rm458m.html

Tenaga proposes 1-for-4 bonus issue of up to 1.12b shares

Tenaga proposes 1-for-4 bonus issue of up to 1.12b shares

Written by The Edge Financial Daily
Thursday, 26 August 2010 23:42

KUALA LUMPUR: TENAGA NASIONAL BHD [] has proposed a one-for-four bonus issue of up to 1.12 billion shares of RM1 each with the entitlement date to be announced later.

As at May 31, 2010, its paid-up capital stood at RM4.35 billion, comprising 4.35 billion shares, while there were 129.85 million outstanding ESOS options.

In a statement to Bursa Malaysia Securities yesterday, Tenaga said the bonus issue would be carried out by capitalising up to RM1.12 billion from its share premium account, which amounted to RM5.27 billion as at Aug 31, 2009.

It said the proposal would reward existing shareholders and increase its capital base that would better reflect its size of operations, as well as improve the liquidity of its shares in the market. AmInvestment Bank Bhd has been appointed as the adviser to the proposal, which is expected to be completed by first quarter next year.

Nestlé rises after OSK Research ups target price

Nestlé rises after OSK Research ups target price


Written by Surin Murugiah
Friday, 27 August 2010 09:19

KUALA LUMPUR: Nestlé (M) Bhd share price rose on Friday, Aug 27 after OSK Research raised its target price for the stock to RM38.53 from RM31.49 previously, and maintained its neutral recommendation on the stock.

At 9.15am, Nestlé was up 40 sen to RM39.88.

In a note on Friday, Aug 27, OSK Research said Nestlé's 1HFY10 earnings were above its own and consensus estimates, making up 61.8% of the research house's full-year forecast.

It said Nestlé's year-on-year earnings swelled 28.6% on the back of improving export sales, mainly from its new coffee and non-dairy creamer lines in Shah Alam.

"Earnings before interest and tax margins rose from 12.9% to 14.5%. Meanwhile, quarter-on-quarter earnings declined 27.8% as marketing expenses rose during the quarter, with new products such as Nescafe Ipoh White Coffee and Maggi whole wheat noodles being launched.

"We revise upwards our earnings forecasts for FY11 and target price to RM38.53 from RM31.49. Maintain Neutral," it said.

http://www.theedgemalaysia.com/business-news/172610-nestle-rises-after-osk-research-ups-target-price.html