Group selling Daewoo
Monday June 29, 2009
SEOUL: South Korea’s Kumho Asiana Group said yesterday it had decided to put Daewoo Engineering & Construction Co up for a sale to ease investors worries about its liquidity.
Kumho Asiana may consider various ways to unload Daewoo including a sale of a 39% stake held by financial investors with management rights, a sale of a 50% stake plus one share, or a sale of a 72% stake owned by the group and financial investors.
The group has a stake of about 33% in Daewoo with financial investors holding 39% and the rest free-floating shares. It bought Daewoo for about 6.4 trillion won (US$5.01bil) in 2006. — Reuters
source:The Star Online
Leader to invest US$150mil in new Cambodia power plant
Monday June 29, 2009
By DAVID TAN
GEORGE TOWN: Leader Universal Holdings Bhd will invest in a new power plant worth US$150mil to US$160mil in Sihanoukville, Cambodia, which is expected to commence operations in 2012.
Group managing director and chief executive officer Sean H’ng Chun Hsiang said the power-purchase agreement for the 100MW coal-fired power plant, which would replace the earlier agreement executed for the 200MW project, would be inked soon.
“We are also in talks with banks now and expect to finalise the financing for the project before the end of this year. We hope to start construction work on the plant soon,” he told StarBiz.
Sean H’ng … ‘power-purchase agreement will be inked soon.’In February 2007, the group announced its winning bid to develop a 200MW coal-fired power plant in Sihanoukville with a local Cambodian partner on a 50:50 joint venture.
However, on Feb 1, 2009, it announced that the Cambodian government had approved to split the 200MW plant into two projects of 100MW each, allowing each original shareholder to develop its own project.
On June 11, Leader said it had formed a joint venture with Cambodian International Investment Development Group Co Ltd to develop the plant.
Leader owns 80% of the joint-venture company, which is also planning to develop another 700MW coal-fired power plant in Sihanoukville.
“This project will be progressively developed after the completion of the 100MW plant in 2012.
“The 700MW plant will be carried out in various phases, with each phase having the capacity to generate 100MW-200MW of power supply, to gradually meet the energy needs of Cambodia,” H’ng added.
Presently, the capacity of the power plants in Cambodia was around 410MW, compared with the forecast demand of 808MW by Electricite du Cambodge (the local state-owned power company), H’ng said.
“The demand is expected to increase to 1,915MW in 2015, eventually hitting 3,867MW in 2020.
“There are vast business opportunities for the power business in Cambodia. We have been building some power distribution lines there. We hope to also explore opportunities in the area of power transmission,” he added.
Leader’s first power plant, using heavy fuel oil, is located in Phnom Penh, catering to its one million population.
For the first quarter 2009, the power business contributed 8% to the group’s total revenue of RM444.7mil and 35% of its total operating profit of RM26.6mil.
On the group’s cable business, Leader’s order book as at end-March stood at about RM700mil, excluding some major recurring orders.
“Almost 40% of the group’s total revenue in the first quarter was from export orders. The group exports to over 20 countries in Asia, the Middle East, Europe and Oceania.
“We will continue to look at new opportunities in the overseas markets. The group is confident of the near-term prospects, given the implementation of the Government’s stimulus packages and also the demand arising from the implementation of the Bakun power transmission projects,” he added.
On the group’s revenue for 2009, H’ng said that although the prices of both aluminium and copper had increased recently, they were unlikely to hit the peak seen in 2008.
“Thus, we expect the group’s revenue to be correspondingly lower this year. The cost of aluminium and copper are mostly passed through to our customers.
“So although the movement of prices of aluminium and copper will impact our revenue, it will not materially impact our bottom line,” he said.
For the group’s first quarter ended March 31, revenue dropped by 31% compared with the previous corresponding quarter due to lower aluminium and copper prices.
The average London Metal Exchange price of copper was US$7,796 per tonne for the first quarter 2008 compared with US$3,428 for the first quarter of 2009. Similarly, the average price of aluminium dropped from US$2,742 per tonne in the first quarter 2008 to US$1,360 in the 2009 quarter.
source:The Star Online
Najib to declare his business policies
Monday June 29, 2009
BURSA Malaysia hosts its annual flagship conference – Invest Malaysia 2009 – for hundreds of fund managers and analysts in Kuala Lumpur tomorrow and Wednesday.
One of the highlights will be a keynote address by Prime Minister Datuk Seri Najib Tun Razak, who is expected to speak on “Malaysia’s Growth Drivers”.
It will be a platform for him to make his first address to the international portfolio investing community since becoming prime minister.
On that platform, he is expected to address issues on business which matter to foreign fund managers rather than matters of domestic concern.
Analysts, for instance, believe he will announce further liberalisation of property ownership by foreigners and the attractiveness of Malaysia for investment. On such terms of reference, this is a wish list that Najib might address.
Political stability
Datuk Seri Najib Tun Razak is expected to address issues on business which matter to foreign fund managers at the Invest Malaysia 2009 conference hosted by Bursa MalaysiaThe strength of the Indonesian and Indian stock markets and currencies in relation to elections there provides proof, if that’s needed, that confidence in the government is bracing for the financial markets.
In the Malaysian context, the concerns are over co-operation between the federal government and state governments which are formed by the rival political coalition, and if there can be a peaceful transfer of power at the federal level.
An important test of political stability in a democracy is whether there can be peaceful transfers of power, not whether a political party will stay in power for all of history. Najib should provide that assurance, even if he goes on to say Barisan Nasional is confident of winning the next general election.
Deficit exit strategy
The Government has operated on a budget deficit in the last 10-odd years. The deficit will surge this year as government spending rises to counteract the recessionary impact, and there are no reserves to draw on.
Australia makes an interesting case study. It had chronic budget deficits in the 1980s which it transformed into surpluses over the last 10 years, until this year of global recession. The Australian government provides excellent public services and infrastructure in spite of budget surpluses.
The Government here needs to examine its budgets – how public funds are spent, corruption and tax collection.
Investors everywhere are concerned with the high budget deficits of governments and want to know how and when that will end.
Reduce reliance on oil revenue
Tan Sri Mohd Hassan Marican, CEO of Petronas, said on Thursday the national oil corporation provided 44.9% of the federal government’s revenue last year.
That is a heavy over-dependence, considering the country’s oil reserves are depleting at a rate of 12% a year. It is in the nation’s long-term interest to gradually wean itself of that. The Government needs to be more efficient in its spending or increase tax revenue from other sources.
Welcome knowledge workers
The country has a liberal policy in employing unskilled low-cost foreign workers. It also needs to attract knowledge workers who can help to build a modern economy.
There are highly-skilled foreigners, for instance, who are unable to obtain permanent resident status even though they have Malaysian spouses and have been here for over a decade. In contrast, large numbers of unskilled foreigner workers are known to have become citizens.
Availability of gas
One of the grievances of foreign investors is they are not assured that industrial gas will be available. For this reason, some decided to locate large industrial plants in other countries.
Local gas is no longer heavily subsidised, contrary to perception, as international gas prices have collapsed, although the electricity-generation industry, which uses about half of the gas available, continues to pay highly-subsidised rates.
Large foreign industrial investors need to be assured of an energy supply as they offer an alternative source of tax revenue and economic development.
Renewable energy and water
Most countries are investing heavily to produce renewable energy to reduce their dependence on oil which could cost over US$100 a barrel again some time in the future, and fossil fuels are the biggest pollutants.
Serious study should be made on solar energy in a tropical country with long hours of intense sunlight, and if nuclear energy is suitable.
A water policy also needs to be articulated. Investors find it ridiculous that with such high rainfall, there should be occasional water shortages.
Singapore is a case study, being globally recognised for its management of stormwater to provide water supply and to control floods.
It was selected as the Water Project of the Year at the Global Water Awards in Zurich in April. It has extensively built reservoirs to catch stormwater, including transforming Marina Bay into a freshwater reservoir in the city.
Remodel APs and NEP
Investors often criticise the NEP for its inefficiencies, such as the issue of approved permits (APs) to import cars by bumiputras. Presently, most of these APs are reportedly issued to just a handful of bumiputras.
A more equitable way would be to distribute the APs to a larger number of bumiputras. The APs, worth hundreds of millions of ringgit a year, could alternatively be auctioned off, with the profits placed in a fund for bumiputras.
A national car policy also needs to be stated in view of the high prices Malaysians have to pay for their cars, and the adverse effects on their disposal income and the economy.
Non-national car players undeterred by higher HP interest rates
Monday June 29, 2009
By EUGENE MAHALINGAM
PETALING JAYA: With the current global economic downturn and the recent hike in the interest rate on hire-purchase (HP) loans for non-national vehicles, it seems like the odds are stacked against the non-national car players.
However, the slew of (non-national) vehicle launches in the past couple of months seems to indicate that the car companies are anything but deterred.
OSK Research motor analyst Ahmad Maghfur Usman said launching new models allowed motor players to continue building market share, which was vital during an economic slump.
“Those who are cash strapped with no new models would be losing market share,” he told StarBiz.
Among the vehicles that have been introduced since May are the Porsche Cayman and Boxster; Chery A520 sedan; Chevrolet Captiva sports utility vehicle (SUV); Audi Q5 SUV; Alfa Romeo GT Blackline coupe, Brera coupe and Spider cabriolet; Mitsubishi Pajero Sport SUV; Mazda 3 Sport; Ford Escape SUV; Chery Tiggo SUV; Toyota Vios TRD Sportivo; BMW Z4 and the Volvo XC60 SUV.
Affin Securities analyst Chong Lee Len concurred that car players needed to launch new models to at least maintain market share, adding that the introduction of new or facelift models was part of the company’s “replacement cycle.”
“The decision to introduce new models is conceptualised three years earlier regardless of market conditions,” she said.
Volvo Car Malaysia Sdn Bhd president Robert Norrman said the decision to introduce its Volvo XC60 SUV was decided two years ago, adding that the model received good response ahead of its launch on June 26.
“Reception has been fantastic. We have had more than a dozen orders even before the launch,” he said.
UMW Toyota Motor Sdn Bhd president Kuah Kock Heng said he was upbeat about the demand for its Vios TRD Sportivo which was aimed at the young and “young at heart.”
“The Vios TRD Sportivo will replace the Vios S variant. Sales of the Vios S had been encouraging, indicating a market demand for sporty-looking cars. This demand can be attributed to our growing youthful population,” he said.
Kuah added that despite the increase in interest rates, the company was able to offer “attractive packages” to its customers.
HP interest rates for new non-national cars increased in April by about one percentage point to 3.25% for loan tenures of five years and below, 3.4% for six to seven years and 3.5% for eight- to nine-year loans.
According to the Malaysian Automotive Association’s May vehicle sales report earlier this month, sales of non-national makes declined 5.4% from April as a result of the interest rate hike, while that of national makes increased 16.6%.
OSK’s Ahmad Maghfur said he expected the interest rate increase to have a short-term impact on the sales of non-national car companies. “Non-nationals are losing out for now but we think this is a knee-jerk effect of the higher HP rates.”
However, despite the dip in demand for non-national makes, Honda Malaysia Sdn Bhd announced last week that it still registered better sales of its vehicles, selling 17,313 units (a growth of 29%) during the five months ended May 31 versus the same period last year.
The company also said it had gained the number one spot in the non-national passenger car segment, underpinned by brisk sales of its new Honda City, which was launched in December 2008.
Among its units sold this year, 51% comprised the Honda City, 17% Honda Civic, 15% Honda Accord and 9% Honda CR-V.
source:The Star Online
Japan said Monday manufacturers have raised production
Monday June 29, 2009 MYT 8:28:00 AM
TOKYO: Japan says manufacturers increased production in May for the third straight month.
The Ministry of Economy, Trade and Industry says industrial production rose 5.9 percent from a month earlier and is showing “signs of an upward movement.”
It predicts output will rise 3.1 percent in June and 0.9 percent in July.
Strong gains among companies making transport equipment, electronic parts and steel products contributed to the results.
The government also says inventory in May fell 0.6 percent from the previous month in the fifth straight month of decline. - AP
source:The Star Online
Media Prima set to challenge resistance levels
June 29, 2009
SHARE prices on Bursa Malaysia rebounded last week, ahead of its mid-year closing on June 30. The Kuala Lumpur Composite Index (KLCI) continued to stay above its critical support of 1,050 points when it closed at 1,075.77 on Friday.
The benchmark index recovered from its intra-week low of 1,028.14 posted on Tuesday to its intra-week high of 1,081.83 on Friday, giving an intra-week trading range of 53.69 points.
The KLCI ended the week at 1,075.77, giving a week-on-week gain of 16.27 points, or 1.54 per cent.
Among the other indices, the FTSE Second Board Index eased 15.35 points, or 0.32 per cent, to close at 4,798.80 while the FTSE Mesdaq Index lost 22.54 points, or 0.54 per cent, to 4,116.97.
On the foreign front, continuing consolidations on Wall Street sent the Dow Jones Industrial Average to close lower at 8,438.39 on Friday, giving a week-on-week loss of 101.34 points, or 1.19 per cent.
The tech stock heavy Nasdaq Index, meanwhile, struggled to stay above its critical support of 1,800 last week. It closed at 1,838.22 on Friday, giving a week-on-week gain of 10.75 points, or 0.59 per cent.
The Tokyo stock market managed to stay above its critical support of 9,000 points last week. The Nikkei 225 Index closed at 9,877.39 on Friday, giving a week-on-week gain of 91.13 points, or 0.93 per cent.
In Hong Kong, the Hang Seng Index once again stayed above its critical support of 18,000 points last week. It closed at 18,600.26 on Friday, posting a week-on-week gain of 679.33 points, or 3.79 per cent.
On Bursa Malaysia, Media Prima Bhd staged a technical rebound last week. Media Prima’s daily price trend closed at RM1.27 on Friday, recording a week-on-week gain of 14 sen, or 12.39 per cent.
The following are the readings of some of the stock’s technical indicators:
Moving Averages: Media Prima’s daily price trend stayed above all its 10-, 20-, 30-, 50-, 100- and 200-day moving averages.
Momentum Index: Its short-term momentum index stayed marginally below the support of its neutral reference line on Friday.
On Balance Volume (OBV): Its short-term OBV continued to stay above its 10-day moving average last Friday.
Relative Strength Index (RSI): Its 14-day RSI stayed below the 50 level. Its technical reading stood at the 56.80 per cent level at the market close on Friday.
Outlook
Many second and third liners rebounded in unison with the key heavyweight index-linked counters last week. Media Prima was one of them, tracing out a five consecutive days of rebounds.
Chartwise, Media Prima’s monthly price trend rebounded after a five-month sideway moves. Its long-term price trend staged a re-test of its 2003 low.
Its weekly price trend staged a technical breakout of its intermediate-term downtrend (See Media Prima’s weekly chart A1:A2). Media Prima’s weekly price trend breached the resistance of the neckline (A3:A4) of its double-bottom pattern formation last week.
Its daily price trend staged a technical breakout of the upper resistance (See Media Prima’s daily chart B3:B4) of its symmetrical triangle pattern formation (B1:B2 and B3:B4) on Friday.
Media Prima’s daily and weekly fast Moving Average Convergence Divergence (MACD) indicators continued to stay above their respective slow MACDs last week. Its monthly fast MACD continued to stay below its monthly slow MACD.
Its 14-day Relative Strength Index (RSI) stood at the 56.80 per cent level last Friday. Its 14-week and 14-month RSIs were at the 53.50 and 41.53 per cent levels respectively.
Media Prima’s daily price trend is likely to maintain its technical composure, trying to overcome its previous resistance levels of RM1.32 and RM1.46.
The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.
source:NST Online
Iraq opens up oil fields for first time in 40 years
June 29, 2009
BAGHDAD: Iraq is this week due to unveil which foreign firms have won contracts to develop its oil and gas fields, nearly four decades after Saddam Hussein’s party nationalised the country’s energy infrastructure.
The deals, likely to be announced live on television, will provide the government with much-needed revenue as it struggles to rebuild the country after three wars and 20 years of debilitating economic sanctions.
The event, originally billed to last for two days starting today, was unexpectedly delayed by one day due to sandstorms that prevented oil company representatives and international media from landing here yesterday.
“The meeting will now start tomorrow and if necessary continue into the following day,” said oil ministry spokesman Assem Jihad.
Thirty-one companies have submitted bids to develop six giant oil fields and two gas fields. The oil deposits, holding known reserves of 43 billion barrels of crude, are in southern and northern Iraq while the gas concessions are west and northeast of Baghdad.
“Our principal objective is to increase our oil production from 2.4 million barrels per day to more than four million in the next five years,” Oil Minister Hussein al-Shahristani said in an interview.
Increasing production to that level will, according to him, pump an extra US$1.7 trillion (US$1 = RM3.54) into government coffers over the next 20 years.
Shahristani has said that only US$30 billion of that sum will go to the companies that have extracted the oil.
“This is a huge amount that would finance infrastructure projects across Iraq - schools, roads, airports, housing, hospitals,” he said, insisting that the country would retain control over its oil reserves.
For energy firms, meanwhile, the appeal of the Iraqi contracts is the chance to plant a foot firmly in the country, the first time such an opportunity has been offered since the Iraq Petroleum Company was nationalised by the Baath party in 1972, seven years before Saddam took power.
A source involved in the bidding, described Iraq as “one of the rare countries in the world where the coming decades will bring real growth in production”.
Not all energy companies are happy, though, with the terms of the contracts being offered by Baghdad.
The foreign firms awarded deals to work here will have to partner with Iraqi government-owned firms, principally the South Oil Company, (SOC) and share management of the fields despite fully financing their development.
They will be paid a fixed fee per barrel, not a share of the profits, and the fee will only be paid once a production threshold set by the government is reached.
“This raises the question of the profitability of the contract,” the source said. “The companies are the ones investing, but have a big problem with the fact that management will be shared.”
But international energy giants cannot afford to ignore the contracts on offer.
“For foreign companies, this is like a first step,” the source said. “They are saying, ‘Let’s accept these terms, even though they’re not our preferred model, just to stay in the game, and hope conditions improve’.”
Domestic firms, including SOC, are furious, however, that contracts are being awarded to their foreign counterparts.
“The fields in question represent 85 per cent of actual production and 50 per cent of reserves,” SOC chief executive Fayad Hassan Nima said. “A loss of control would lead to the death of national companies.” - AFP
source:NST Online
‘China firm in talks to buy Pierre Cardin’
June 29, 2009
BEIJING: A private Chinese shoe manufacturer is in discussions with French attire maker Pierre Cardin for a possible acquisition, a local newspaper reported yesterday.
Guangzhou Jiansheng Trading Ltd, once a marketing agent for Pierre Cardin, expected the talks with the French firm to yield a result in a month’s time, the Chinese company’s chairman Liu Jianxue told Guangzhou Daily. No further details were provided.
The paper quoted Europe-based Chinese language media as saying another private Chinese firm was also interested in investing in Pierre Cardin, and the two firms were each offering ?200 million (?1 = RM4.97) for the acquisition.
Pierre Cardin is one of the earliest Western fashion brands.
China’s economic planning agency issued an order earlier this month asking Chinese companies to report intended overseas acquisitions to Beijing before signing any legally-binding deals, as the country’s outbound investment grows rapidly. - Reuters
source:NST Online
Jaguar, Land Rover enter India
June 29, 2009
MUMBAI: India’s Tata Motors yesterday announced the entry of luxury British marques Jaguar and Land Rover into India, but insisted there were no plans to assemble them in the country for the time being.
Six models - three each from Jaguar and Land Rover - will be sold from today in India, which is amongst the world’s fastest-growing global automobile markets.
“This launch ushers in a new breed of vehicles in India, which had been disconnected with consumers here for some years,” Ratan Tata, chairman of the Tata Group, told a news conference in Mumbai.
The Jaguar range includes the XF, XFR and XKR models while the Land Rover brands coming to India will be Rover Discovery 3, Range Rover Sport and the basic Range Rover.
All models will sell for between 6.3 million (100 rupees = RM7.62) and 9.2 million rupees at a new purpose-built showroom in Mumbai.
“The Jaguar and Land Rover cars had been condemned in the downturn (but) they are terrific brands,” Tata said.
Senior Jaguar and Land Rover executives were reluctant to divulge how many cars they expected to sell in India, where the luxury car market already includes rivals like Italy’s Porsche, Germany’s BMW, Mercedes and Audi.
“India’s premium car market is small but with a huge potential,” said Land Rover managing director Phil Popham.
Tata Motors last Friday posted its first consolidated full-year net loss in eight years at 25 billion rupees, partly blamed on a slump in sales at Jaguar Land Rover, which it bought from Ford last year.
Jaguar Land Rover global sales dropped nearly a third in the 10 months to the end of March to 167,000 vehicles from 246,000 the previous year.
That prompted the company to say it would not rule out further job losses and plant closures in Britain, where the cars are produced.
Jaguar Land Rover chief executive David Smith told reporters the British workforce were “realistic” about the possibility.
“If the market dicta-tes, future jobs and plant shutdowns cannot be ruled out” if the economic situation deteriorates, Smith added.
Some 2,000 workers have lost their jobs in a tumultuous couple of years for both luxury brands, but Ratan Tata said there were no plans at present to switch production to India to reduce overheads.
“Whether we produce or assemble Jaguar or Land Rover in India will depend on the business case at that time,” he said.
“I don’t think we have any plans for the present moment to do so.” - AFP
source:NST Online
MASkargo’s 747-400 may take to the air again by Q4
June 29, 2009
By Presenna Nambiar
MALAYSIA Airlines Cargo Sdn Bhd (MASkargo), the cargo subsidiary of Malaysia Airlines, is working towards bringing its grounded 747-400 freighter back into operations by the fourth quarter of this year.
It had grounded the plane in March when capacity proved to be too much for demand. The move saves MASkargo over RM1 million a month.
“The utilisation of our aircraft has increased, but we want it to increase further before we bring the grounded aircraft back into service,” MASkargo managing director Shahari Sulaiman told Business Times last week.
The carrier has cut 40 per cent capacity off its scheduled operations and re-deployed two freighters for charter services in the last few months, in a move to maintain its load factor.
The strategy has so far worked, considering that the average load factor remains at the same level as last year, at 65 per cent.
“We are getting the load factors, but of course for the yields to improve significantly, the market must also improve significantly. Otherwise you won’t see yield improvements,” Shahari said.
So far, it has seen yields dropping 17 per cent.
Shahari said the issue with yields is that it relies heavily on China, which is still the most important market for cargo players.
“If China starts to improve, then the general health of the industry will improve.
“But there is no sign of a significant recovery as yet, but it is going in the right direction. I don’t see any need to cut capacity further,” Shahari said.
Besides realigning its operations, MASkargo has also used the opportunity to diversify its services, upgrading itself to be able to accommodate specialised shipments like perishables and pharmaceuticals.
A recently signed air services agreement between Malaysia and Indonesia has also opened new doors for MASkargo, Shahari said, as it opens up points of sale for the carrier, allowing it to fully capitalise on the Jakarta-Australia route.
The amendment on the air traffic rights allows freighters to carry cargo from its home country and a foreign one, and for it to go even further on to a third country; known as third, fourth and fifth freedom traffic rights for freighter services.
MASkargo has one flight on the Jakarta-Australia route, which has been recording 80 per cent load factor in the last month.
“Indonesia is also one of the few countries that still sees growth. So we see this new development (on the air services agreement) as something very encouraging for us,” Shahari said.
Cargo volumes out of Indonesia have increased 15 per cent year-on-year, despite the global economic crisis.
Shahari said opportunities are also there for MASkargo to right-size itself should there be a need, because of the pending expiry of a wet lease of five freighters next year.
“In terms of cost exposure, we can right-size our operations. For example, if (the situation) does not pick up, we can give back a couple of the aircraft … whatever that makes sense to us,” he said.
source:NST Online