Saturday, March 12, 2011

Japan Quake's Financial Impact: Five Things to Watch

While commodity and currency markets took the biggest immediate hit from Friday's earthquake and tsunami in Japan, the damage will be felt throughout the world's economy and the US.

In addition to the massive human toll, the quake and ensuing tsunami will exact an economic toll on Japan, which is still struggling to shake the detritus of its "lost decade" brought on by economic stagnation.

The price on both fronts is impossible to calculate at this point, but it no doubt will be profound.

"It's going to be of the most expensive disasters in history before it's done," Dennis Gartman, hedge fund manager and author of The Gartman Letter investor bulletin, told CNBC. "This is not just a Japanese circumstance, this is on both sides of the Pacific and the dollars are going to add up very quickly."

Here, then, is a look at five of the main financial effects of the crisis:

1. Ultimately, a Recovery

After Japan copes with its massive human and financial loss, the country will have to focus on rebuilding. That will take billions in private and public funds, a stimulative effort that, grimly ironic though it may be, will generate some level of stimulus and recovery.

"Obviously the human toll is the most important thing," said Nicholas Colas, chief investment strategist at ConvergEx in New York. "Generally afterward you get a big rebound in economic growth. Rebuilding creates a lot of jobs for a lot of people and a lot of new wealth creation."

Those jobs likely will come across a variety of fields, particularly in construction and energy, which sustained heavy damage from the quake.

"There's certainly going to be a lot of resources directed toward rebuilding that part of Japan," said David Resler, chief economist at Nomura Securities in New York. "It's not all going to come from the government-it's going to come from insurance companies, private companies and private savings to divert resources toward rebuilding a devastated part of the island."

The Bank of Japan meets Monday to discuss monetary policy; Capital Economics in London said a loosening is likely.

2. A Stronger Yen

The widely circulated Japanese currency is going to have to come home to help rebuild the country, meaning that the historically weak yen is going to start rising against its counterparts.

That trend quickly took hold during Friday trading, when the yen gained nearly 1.5 percent against the US dollar and nearly 1 percent against the Swiss franc. It's a trend likely to continue, with some volatility, as the country and its companies bring yen back to the mainland.

"Money is going to be repatriated back to Japan to pay for the damages," Gartman said. "That's going to be required to take care of the impact-the dollar impact, the yen impact-of the (damage) there."

3. Oil Prices Could Drop, But Only Briefly

Energy prices fell sharply Friday, partly in response to a likely drop in demand from Japan and partly from the supposed Day of Rage in Saudi Arabia amounting to less turmoil than anticipated.

How long the trend lower lasts, though, is a matter of debate, as the lull in the Middle East is probably only temporary, speculators continue to scoop up oil contracts at a record pace, and emerging market growth acts to put a floor under any major slides.

"Japan is still a very large economy. They import all their oil, they don't have any natural oil reserves," Colas said. "There is less requirement for energy."

4. Less Demand for US Treasurys?

On a normal day, a disaster on the scale of the Japan tragedy might send global investors into the safety of US Treasurys.

Yet yields rose Friday, and while there were multiple explanations-profit taking after a strong week of auctions and some decent economic data-some feared that the third-largest buyer of US debt after the Federal Reserve and China might not have as much money to buy Treasurys.

"It begs the question of whether the Japanese will be able to step in and continue to be big buyers of Treasurys," said Quincy Krosby, general strategist at Prudential Financial in Newark, N.J. "You have to believe that they're going to have to use quite a bit of their money towards rebuilding infrastructure."

Japan held $882 billion of Treasurys at the end of 2010, a number that had been steadily increasing since June. China remains the top foreign buyer of US debt, with $1.16 trillion on its books.

5. A Modest Hit to Stocks

Global equity markets languished Friday, with Asian stocks losing as much as 5 percent soon after the earthquake news hit.

But by the time US investors had to digest the situation, focus seemed to drift elsewhere as the market mainly looked at the balance between a consumer trying to rebound, a higher trade deficit and surging gasoline prices.

As a result, stock prices actually were edging higher heading into afternoon trading.

"There have been a lot of catalysts recently that could have taken this market a lot lower. Look at all that's come down recently," said James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis. "I'm not sure this one is doing to do it any more than the rest of them."

Industries within the market-insurers in particular-may take a hit. But more broadly speaking the effects from Japan most likely will take firmer root elsewhere, despite anticipation for just such an exogenous effect that might trigger a pullback from the two-year rally.

"I don't think this is the event that would create fear and uncertainty in the market," said Todd Horwitz, chief strategist for the Adam Mesh Trading Group in New York. "It's a natural event, an earthquake. They'll recover."

Publish date:12/03/11

大地震撼动亚洲股市 本地房地产上市公司几乎全线下跌






  在日本多个地区拥有29家养老院和一家制药厂的百汇生命产业信托(Parkway Life REIT,PREIT),股价昨天下跌4分,即2.3%,闭市报1.70元。




不过,本报联络的多家本地大公司,包括嘉德置地、城市发展、星狮集团(Frasers Centrepoint)、杨忠礼集团、星展集团、大华银行和华侨银行,都先后表示它们在日本的业务,其实并没有受到地震或海啸的影响。









Source/转贴/Extract/: 《联合早报》
Publish date:12/03/11

剑桥工业信托1.168亿元 “售后回租”三房地产

剑桥工业信托(简称CIT)以1亿1680万元,通过“售后回租”(sale and lease back)方式,收购三个房地产,也提议以八配一形式发售附加股筹资5670万元。
  其中一项房地产是与和隆集团(Hoe Leong)协议,以6330万元买下后者位于金文泰环道4号及6号的企业总部。根据协议,若任何一方行使选择权,CIT将支付4000万元现金,并在和隆集团对在该地址完成扩建工程、多兴建一栋新建筑后,支付2330万元。






  和隆集团主席兼总裁柯毓麟说:“展望未来,我们计划把这笔钱的一部分,用来打造一支现代且年轻的光船租船(bareboat charter)岸外支持船队,也建立起集团的内部船只管理能力。”

Source/转贴/Extract/: 《联合早报》
Publish date:12/03/11

Berlian Laju dealt cabotage curveball

Business Times - 12 Mar 2011

Berlian Laju dealt cabotage curveball

Abandoning cabotage rule could mean more competitive environment for its FPSO bids


IT has been a month of varied fortunes for Indonesian chemical tanker operator PT Berlian Laju Tanker. Barely three weeks after securing refinancing and a credit rerating upgrade, the firm's stock was sunk by investors as much as 10 per cent during trading yesterday - from 5 cents to 4.5 cents - on news that Indonesia's cabotage laws have hit a snag.

The oil-and-gas industry in Indonesia has been granted an exemption from the cabotage rule - which bans foreign vessels from domestic operation - with effect from May, in order to avoid production losses, Indonesia's Transportation Minister Freddy Numberi was reported to have said this week.

PT Berlian Laju had been banking on the cabotage rules to pave the way for its entrance into the market for floating production, storage and offloading vessels (FPSOs), floating storage and offloading vessels (FSOs), and very large gas carriers (VLGCs). The stock ended the day by closing unchanged at 5 cents.

'Abandonment of the cabotage rule could result in a more competitive environment for future FPSO bids. Indonesia currently employs 21 FPSO units, most of which are either foreign-flagged or more than 25 years old,' a CIMB Research note on the matter said yesterday. The research house downgraded the stock from 'outperform' to 'trading sell'.

'Berlian is presently participating in five FPSO bids, out of 14 units that require replacement this year . . . Management has denied that its FPSO tenders will be affected, but uncertainties could create selling pressure.'

This development could also affect the listing chances of its unit PT Buana Listya Tama.

'Berlian plans to group vessels with are deployed within domestic Indonesian waters and targets to list some time in May . . . Following the abandonment of the rules, PT Buana Listya Tama could lose its attractiveness to the market, and investor interest might be impacted, which could result in lower valuations or the listing may even be cancelled,' the note said.

This curveball follows a spell of upbeat news from the debt-laden PT Berlian Laju, which announced last month that it had secured a loan facility of US$685 million to prepay US$593 million in existing loans. This uptick in events prompted Standard & Poor's Ratings Services to remove the firm from CreditWatch, where it was placed with negative implications last August. Shortly after that, the firm announced that it had sealed a sale-and-leaseback deal for four chemical tankers with Standard Chartered Bank worth US$93 million.

'Both measures were intended to give Berlian more near-term liquidity, buy time on debt repayments, and prevent a breach of debt covenants. But they are more costly to the company in terms of interest rates,' the report noted.

Publish date:12/03/11

HPH Trust prices its S'pore IPO at US$1.01 per unit: sources

Business Times - 12 Mar 2011

HPH Trust prices its S'pore IPO at US$1.01 per unit: sources

(Hong Kong/Singapore)

HONG Kong billionaire Li Ka-Shing's Hutchison Port Holdings Trust priced its Singapore IPO at US$1.01 per unit, in the middle of a US$0.99-US$1.03 indicated range which itself was tightened from a wider range on Thursday, three sources with direct knowledge of the deal told Reuters.

The offering will raise US$5.4 billion in total, in what will still be South-east Asia's largest stock offer.

The IPO was earlier expected to raise US$5.8 billion on an indicated price range of US$0.91 to US$1.08 a unit.

The sources declined to be identified because the final price has not been made public, while the company and banks involved in the deal were not available to comment.

The IPO, which takes the form of a business trust, had attracted cornerstone investors including Singapore investment company Temasek Holdings, US hedge fund manager Paulson & Co and fund manager Capital Research and Management, which had committed to pour in US$1.6 billion in the deal.

Despite the strong interest, the IPO did not meet the initial pricing expectation, reflecting investors' anxiety about financial markets due to political turmoil in the Middle East and rising inflationary pressures.

That raises concern about upcoming multi-billion dollar IPOs in Asia, led by commodity trading firm Glencore's listing in Hong Kong and Mapletree Commercial Trust's S$1 billion deal in Singapore. 'There is a pipeline of deals, but investors remain somewhat mixed at the moment,' said John Woods, Asian strategist at Citigroup Private bank in Hong Kong.

Hutchison Port Holdings, a unit of Mr Li's Hutchison Whampoa, owns and operates ports in Shenzhen and Hong Kong and is aiming to cash in on a recovery in global trade and provide investors with access to China's booming infrastructure business.

Mr Li, Hong Kong's richest tycoon, chose Singapore because of more favourable tax treatment for trust-like structures. A business trust is any grouping of assets that usually offers a steady stream of dividends and appeal largely to more conservative investors who want to diversify from bonds.

'This will be a significant boost to Singapore's efforts to compete with the likes of Hong Kong and Shanghai as a leading financial centre in Asia,' said Jake Robson, a partner at law firm Norton Rose in Singapore who specialises in equity capital markets.

The Hutchison ports listing is the first large-scale launch of a business trust by a non-Singaporean business and the amount of money that will come in will exceed the total US$2.9 billion raised through IPOs in Singapore for the whole of last year, according to Thomson Reuters data.

'The price probably reflects the greater volatility and uncertainty in the markets. It's a very large IPO so to get it at the high end of the price range would have been tough,' said Kevin Scully, managing director at NRA Capital.

'Even at US$1.01, the yield is quite attractive for medium-term investors as long as China and Asian economies remain buoyant,' he added.

A source involved in the deal told Reuters the yield is about 5.8 per cent, based on the US$1.01 price. This compares with a yield of around 7 per cent offered by many Singapore-listed business and property trusts.

The size of the Hutchison ports offering exceeds Petronas Chemicals' US$4.1 billion fund-raising last year, which was the biggest IPO in South-east Asia at that time.

Hutchison Whampoa's ports subsidiary and Singapore's PSA could jointly own as much as 38 per cent of the company after the IPO.

The listing is positive for SGX, which is currently in a bid to acquire Australian stock exchange operator ASX in a US$7.7 billion deal, as it could potentially attract more business trusts and ports-related entities to list in the city-state, Credit Suisse head of Singapore research Sean Quek said.

The continued strong interest in the Hutchison ports IPO contrasts with the diminishing appetite for new issues, which has delayed a planned S$1.1 billion Singapore IPO by Perennial China Retail Trust, a trust managed by former CapitaLand shopping mall chief Pua Seck Guan.

DBS, Deutsche Bank and Goldman Sachs are joint bookrunners and issue managers for the offering.

JPMorgan, UBS, Barclays, Morgan Stanley are among co-lead managers. -- Reuters

Publish date:12/03/11

CMT's $250m bond issue fully taken up

Business Times - 12 Mar 2011

CMT's $250m bond issue fully taken up

To meet overwhelming response, lead manager may choose to exercise upsize option to raise size of issue to $350m


CAPITAMALL Trust's (CMT) $250 million offering of three-year unsecured convertible bonds has been fully snapped up by institutional and accredited investors.

The base offering size of the bonds, due April 2014, was raised from an initial $200 million - as announced at the launch - to $250 million because of the strong demand, said CMT.

'We are encouraged by the strong response to the issue of our convertible bonds,' said Simon Ho, chief executive officer of CapitaMall Trust Management Limited (CMTML), manager of CMT. He added the issue was to 'optimise' overall debt structure and 'diversify' funding sources.

To meet overwhelming response, the lead manager may choose to exercise the upsize option within 30 days from March 10, 2011 to further raise the size of the issue by up to $100 million, to $350 million. The sole bookrunner and sole lead manager for the issue is Credit Suisse (Singapore) Limited.

The conversion price for the bonds stands at $2.2692 per unit and will offer an interest of 2.125 per cent per annum, payable on a half-yearly basis.

The funds raised from the bond issue will be used primarily for debt refinancing, which includes the refinancing of an existing convertible bond of $550 million that has a put option on July 2, 2011 at 105.43 per cent of the principal amount. The put option is currently out-of-the-money.

Moody's sees 'no impact' on CMT's rating as a result of its latest bond issue.

They added though the new bond issue could raise CMT's debt-to-assets ratio beyond that incorporated in the trust's current rating, the redemption of the entire existing convertible bond of $550 million with fresh proceeds and available cash is expected to take leverage back to levels in line with current ratings.

Moody's Investors Service currently has an A2 corporate family rating or A3 senior unsecured debt rating for CMT.

The only other major debt maturing in the next 12 months, other than the put option pertaining to the existing convertible bond, would be CMT's 40 per cent share in term loans drawn under a term loan facility granted to RCS Trust by a special-purpose company, Silver Oak Ltd.

However, analysts generally feel this is not a source for worry and is likely to be manageable by the trust going forward.

CMT shares eased two cents to end at $1.81 yesterday amid a broad market retreat.

Publish date:12/03/11

Local stocks with Japan exposure shaken

Business Times - 12 Mar 2011

Local stocks with Japan exposure shaken

Among the worst hit are Saizen Reit, which plunges 6% in price, and GLP, which slips 3%


LOCAL stocks with exposure to Japan spiralled downward on the Singapore Exchange yesterday, following the earthquake and tsunami that hit the country in quick succession.

Among the worst-hit were Saizen Real Estate Investment Trust (Reit) and Global Logistic Properties (GLP), which have properties located in the earthquake- and tsunami-hit Sendai city.

Saizen Reit's counter closed 6 per cent - or a cent - lower at 15.5 cents, far outpacing the Straits Times Index's loss of 1.04 per cent. Of Saizen's 146 properties, 22 are in Sendai. The trust has another three properties in Morioka, a prefecture north of Sendai.

GLP shed 3 per cent on the news, closing 6 cents lower at $1.90. The trust derives 82 per cent of its portfolio value from Japan. It has four properties either in Sendai or nearby Fukushima.

Currently, it is not known if any of its properties in Japan have been damaged, but its prospectus includes a line that says that its insurance policies in Japan cover damage to facilities and business interruption, including those caused by earthquakes. It has a caveat, however, that such coverage might not be sufficient.

'There's been some knee-jerk reaction on GLP but I expect this to taper off within the next one week, as soon as GLP can give investors a more detailed assessment of the impact on them. For companies with exposure, that is what I would want to see,' said Liu Jinshu, an investment analyst at SIAS Research.

Parkway Life Real Estate Investment Trust lost 2.2 per cent, closing at $1.70, 4 cents lower. It has 28 low-rise nursing homes and one distributing and manufacturing facility in Japan. Revenue from those properties accounted for 34 per cent of gross revenue in 2010.

While none of its properties are in the worst-hit Miyagi Prefecture, one of them is in Chiba, where Cosmo Oil Co's oil refinery caught fire yesterday, following the earthquake.

While some analysts believe that office assets - which tend to be tall buildings - are likelier to sustain more damage from the earthquake, an analyst who covers the Reits sector in Singapore said that the squat buildings will be worst hit by a tsunami.

Mapletree Logistics Trust has 14 properties in Japan, one of which is Sendai Centre in the Miyagi Prefecture. Another four are in Chiba. Its counter closed 2.7 per cent lower to 91 cents yesterday.

Other counters with an ostensibly smaller exposure to Japan saw correspondingly smaller selldowns. Frasers Commercial Trust, with its four properties in Japan, closed at 81 cents, 1.22per cent lower.

Starhill Global Reit - which owns seven retail properties that are all in Tokyo - saw its share price dip 1.6 per cent, while CapitaMalls Asia with properties in Tokyo, Kobe, Osaka and Hokkaido closed the day 1.1 per cent lower.

In the region, markets were similarly downbeat. The Hang Seng Index was down 1.55 per cent while the FTSE Bursa Malaysia KLCI lost 1.4 per cent.

The glumness spread to Europe, hitting insurers' stocks such as Munich Re which lost 4 per cent by mid-day and Swiss Insurance Co, which lost almost 6 per cent.

The disruption caused by the natural disaster would only serve to underscore the shaky fundamentals of Japan's recovery, said Vishnu Varathan, Asia economist for Capital Economics.

'There was quite a bit of hope for a Q1 rebound in the Japanese economy. So far, our view has been that some of these hopes have been overplayed due to underlying confidence data and some industrial data that do not look all that robust,' he said.

'So this earthquake is probably going to dampen the economic momentum further in Q1. This increases the chances that the recovery in Japan will be a lot more anaemic. It's very unfortunate.'

The impact outside Japan, however might be limited. Mr Varathan pointed out that Japan is not a major consumption power. While there might be some disruption to regional supply chains, there will be marginal impact.

The yen, which fell to a two-week low against the greenback in the wake of the quake, would be beneficial to trade and growth, according to Leong Wai Ho, an economist at Barclays Capital. 'That offers the economy some reprieve in the near-term. I think the broader question is whether the Bank of Japan will do anything extraordinary in the aftermath of this event to keep growth conditions more conducive,' said Mr Leong.

Beyond the short-term, Japan is expected to recover. 'The impact will be short-lived, and the reconstruction will help to add gross domestic product points down the road,' he said.

Publish date:12/03/11

Strategy - Foreign Buying (MIDF)

Strategy - Foreign Buying

12 stocks to look at if market tanked today

• We expect the market to tank today after the bloodbath in Europe and the US. But the fact is foreign investors have been picking up stocks on Bursa Malaysia. They turned net buyers on Friday last week, the fi rst time since January, and continued to be net buyers on Tuesday and Wednesday.

• The net buying amounted to RM220m on Friday, but turned marginally negative on Monday at -RM32.6m. Foreign investors resume net buying on Tuesday and Wednesday with RM124.5m and RM107m respectively (see chart). They turned net seller with a marginal -RM96.7m, that is rather expected and indicates a strategy of not chasing prices and speedy profit taking. Since last Friday, gross purchase amounted to RM2.0b, a sizeable 5-day figure.

• Foreign investors have been selling down local shares since January, after a bullish start to the year. The percentage of Bursa’s total market capitalisation held by foreign investors was 21.9% at the end of December. We estimate this fi gure to be about 21.5% currently, assuming net foreign selldown of about RM4b since the beginning of the year.

• We have identifi ed 12 big cap institutional stocks which we believe bore some brunt of foreign selling during the market weakness in February and in the early days of this month. Most of these stocks experienced a strong built-up of foreign shareholding in January but there was an abrupt scaleback in February due to profi t-taking and concerns over the market. There are also other stocks such as IOI Corp and Media Prima, which foreign investors have been gradually exiting since last year.

• We believe that the fundamentals of these stocks are still defensible, and we are reasonably sanguine with the prospects of these companies. If foreign investors continue to load up on Malaysian equity in the days ahead, these are some of the stocks that we expect to be bouncing on the foreign repurchase.

• Top of list based on year-to-date performance would be Proton. The latest Lotus episode is an aberration and an excuse to sell down the market. We believe Proton’s February auto sales fi gure will surprise, carrying the momentum after notching 15k+ in January. Airlines are always a tough call when crude oil price is >USD100pb. But Malaysia Airlines (MAS) has retraced almost 25% from its 52-week high and we are confi dent that it is operationally and fi nancially lean to take on the high fuel cost scenario. Just like that in 2008, the current high oil price episode may have a terminal consequence on many airlines unprepared for such contingencies.

• 2 names conspicuously missing from the list are Petronas Chemical and MMHE. These two recent IPOs have proven to be a hit with foreign investors, and prices have moved in tandem with foreign activity. However, we have a Neutral call on both. Petronas Chemical, in our opinion, is still in a price discovery journey.

• The market is likely to be subdued today after Moody’s downgraded Spain and the Dow closed below the psychological 12,000 points. We are not unduly concerned over Spain’s downgrade. It is down one notch and but is still rated at Aa2. We are more concerned of other countries such as Ireland and Greece, should crude oil continues to rise. The investment angle is the foreign buying trend.

Source/转贴/Extract/: MIDF Research
Publish date:11/03/11

Muhibbah Gearing up for next growth phase (asia)

Muhibbah Engineering (M) Bhd
_ Gearing up for next growth phase
_ Cost overruns over, loss-making projects completed
_ Order-book building up again, now at RM3.1b
_ Attractively priced well below peers

Investment Summary
Muhibbah Engineering, a former darling of investors, is set to make a major comeback as it puts its overseas projects’ cost overrun issues behind it and gears up for the next phase of growth. The company has a diversified earnings base, with earnings from infrastructure construction, cranes, shipyard, as well as concession income from airport and road maintenance.

It will benefit from the ramp up in construction activities for projects such as the Klang Valley’s Mass Rapid Transit (MRT) system, as well a slew of property developments on privatized state-owned land, such as the 3,300 acre Rubber Research Institute (RRI) land in Sungei Buloh. Meanwhile, the focus on the oil and gas sector will serve it well as the government allocates more spending under the Economic Transformation Programme, and with national oil giant Petronas Nasional planning to spend RM250 billion in capex over the next five years.

Muhibbah was a favourite of investors in 2005-2006, when the then low profile company saw its share price surge as investors, especially foreign funds, warmed up to its growth prospects, attractive fundamentals and low starting valuations. The company had positioned itself as a global construction and infrastructure player, and an Indochina play.

Muhibbah secured a number of large domestic and international contracts, which boosted its order-book from RM810 million in 2005 to a peak of RM4.31 billion in 2008. As a result, net profit rose nine-fold from RM7.8 million in 2004 to RM70.1 million in 2007.

However, the aggressive growth also came at a price.
The sharp rise in building material prices just before the global financial crisis and cost overruns at its Yemen LNG project caused losses in 2008 and 2009 for the core infrastructure and construction division, although the company remained profitable.

Net profit declined from RM70.1 million in 2007 to RM21.8 million in 2008 and RM12.7 million in 2009. Its share price slumped, exacerbated by the global crisis and the exit of foreign shareholders. We understand its foreign shareholding stood at about 40% at its peak, but has since fallen to below 10%.

After spending much of the last two years on a “kitchen sinking” exercise and completing its less lucrative projects, Muhibbah is now well positioned for the next phase of growth and is rebuilding its order-book with better quality projects.

The results were already evident, with net profit for 2010 increasing 2.6-folds to RM33.8 million, driven by a turnaround in the infrastructure construction division, which returned to the black with a pre-tax profit of RM5.17 million, compared with operating losses of RM65.4 million in 2009.

As at 22 February 2011, Muhibbah’s outstanding order book totaled RM3.1 billion, comprising RM2.29 billion from infrastructure construction, RM453 million from cranes and RM360 million from shipyard. About 49% of the total order-book is related to the oil and gas industry.

Meanwhile, a likely resolution of long outstanding issues surrounding the Asia Petroleum Hub (APH) project in Johor, for which Muhibbah has been owed some RM340 million since mid-2009 for works completed but not paid, could also lift sentiment on the stock. The sums owed are listed as receivables, and have not been written down.

We expect Muhibbah’s growth momentum to accelerate in 2011 and 2012 as its loss-making overseas projects give way to more profitable ones, and as order-book replenishment gets underway. We expect net profit to increase 46.3% to RM49.5 million in 2011 and 19.9% to RM59.3 million in 2012, with EPS of 12.4 sen and 14.9 sen, respectively.

At RM1.56, Muhibbah is trading on attractive P/E valuations of 12.5 times for 2011 and 10.5 times 2012 earnings and a modest 1.2 times its book value of RM1.28 as at Dec 2010. Its valuations are far lower than the major construction players, such Gamuda and IJM Corp, which trade at 20-21 times forward earnings and WCT, which trades at 15 times.

We maintain our BUY recommendation.

Recent developments
Growing order-book
Muhibbah’s total order-book grew rapidly over the last few years, from RM810 million in 2005 to a peak of RM4.31 billion in 2008. However, the aggressive growth also came at a price as it incurred large cost overruns for some of its overseas projects as input costs increased.

From its peak, the company’s order-book fell to RM3.12 billion in 2009 and RM2.79 billion in Aug 2010, before rising to RM3.1 billion as at Feb 22, 2011. The decline in its order-book from its peak in 2008 reflected the completion of several large projects, notably those that had incurred large cost overruns, such as the RM734 million Yemen LNG contract for the building of a jetty and terminal. The project was affected by higher raw material costs as well as specific costs relating to underwater works.

The Yemen LNG contract had largely been responsible for the infrastructure construction division’s operating losses of RM62.1 million in 2008 and RM65.4 million in 2009, which marked a reversal from operating profits of RM19.5 million to RM31.5 million in 2005-2007 – despite the far smaller scale of operations earlier.

In 2003-2005, its construction operating margins had ranged between 7.4% and 9.7%, before falling to 3.1% in 2006, 4.3% in 2007 and losses in 2008- 2009. Positively, this division has since moved back into the black in 2010 with small pre-tax profit of RM5.2 million. We believe Muhibbah has put the problems of cost overruns behind it.

On Jan 26, 2011, Muhibbah, in consortium with Perunding Ranhill Worley Sdn Bhd, was awarded the contract for the engineering, procurement, construction, installation and commissioning for the LNG Regasification Unit of the LNG Regasification Project in Melaka. The contract was awarded by Petronas Gas Bhd with a contract value of RM1.07 billion. Construction will begin in April 2011 and is expected to be completed at the end of July 2012. We understand Muhibbah’s portion of the project is worth RM480 million. Among the major outstanding contracts in Muhibbah’s order-book are: South Klang Valley Expressway (RM581 million outstanding order-book), catering

facility at the new Doha International Airport (RM509 million), Asia Petroleum Hub, Johor (RM817 million contract, outstanding order-book: RM183 million), Offshore Marine Centre at Tuas South Avenue 8, Singapore (RM121 million) and government offices at Putrajaya (RM206 million).

Rising crane earnings and margins
Muhibbah’s crane division, Favelle Favco, has been performing well since going public in Aug 2006. Favelle has turned around nicely in recent years, charting decent revenue growth and much faster bottom-line expansion due to higher margins from earlier internal restructuring efforts to reduce costs, improve efficiency and penetrate new markets.

Favelle currently has four plants – in Senawang, Malaysia; Sydney, Australia, Copenhagen, Denmark and Texas, US. About 82% of its sales are generated from overseas markets.

Favelle has been focusing more on the oil and gas industry, such as offshore cranes used in the industry. The oil and gas industry accounts for 64% of its RM453 million order-book.

Operating profit for the division rose from RM17.6 million in 2005 to RM17.6 million in 2006, RM28.9 million in 2007 and increased even during the recent global crisis – to RM32.2 million in 2008 and RM39.6 million in 2009. Operating margins improved from 4.2% in 2005 to 7.4% in 2009.

Steady contributions from concessions
Muhibbah’s concessions consist of stakes in airport operations in Cambodia (under 30% owned Societe Concessionaire des Aeroports, or SCA) and a 21% stake in Roadcare (M) Sdn Bhd, which holds a 15-year concession for the maintenance of 6,000 km of federal roads in the central region of peninsular Malaysia, namely Selangor, Pahang, Kelantan and Terengganu. The Cambodian airport operations are held by 30%-owned SCA with the remaining 70% held by French construction conglomerate Vinci. SCA was awarded the concession for the international airport in Phnom Penh in 1995 and Siem Reap in 2001.

Both concessions were originally scheduled to end in 2020, but have since been extended to 2040 following the award in 2006 of a third international airport, in Sihanoukville.

The airport operations enjoying steady income, reflecting the increasing popularity of Cambodia as a tourist attraction with new direct flights, low-cost flights, and the increasing popularity of the world-famous Angkor Wat temples, a UNESCO World Heritage site.

In 2008-2009, however, tourism arrivals into Cambodia fell for two years, due to the global financial crisis, H1N1 influenza scare and Thailand’s airport closures and political uncertainties, which disrupted travel to the Indochina region for long haul tourists.

Passenger arrivals into the two airports fell 11.8% to 2.843 million in 2009 from 3.224 million in 2008, and 3.331 million in 2007.

With the economic recovery, the end of the H1N1 outbreak and easing uncertainties in Thailand, airport arrivals have rebounded strong by 17% in 2010 – from 2.843 million to 3.316 million passengers. Growth was driven at Siem Reap (up 27% to 1.597 million passengers), while Phnom Penh’s airport saw an 8% growth to 1.719 million passengers.

Meanwhile, the Sihanoukville International Airport, its third airport concession, has opened to private planes and charter flights, but full commercial operation to scheduled flights have not started due to a lack of quality accommodation in Sihanoukville, as hotels are still being built. Sihanoukville is Cambodia’s only deep-sea port and a major beach resort town. It houses many of Cambodia’s industries (garment is the biggest industry in Cambodia), as well as an emerging oil & gas industry in the Gulf of Thailand. With enhanced air transportation links, Sihanoukville will be promoted as a major beach resort and industry base.

Muhibbah’s shipyard division, under Muhibbah Marine Engineering Sdn Bhd (MME) has enjoyed steady growth despite the shipbuilding industry’s volatility. Operating profit has increased steadily from RM7.6 million in 2005 to RM58.2 million in 2009, while revenue rose from RM67.1 million to RM296.2 million in that period.

MME benefitted from the rise in demand for marine vessels used in the oil and gas industry, such as anchor handling tug and supply vessels, due to high oil prices. While the environment of high oil prices leading up to 2008 saw a large number of orders, the subsequent global credit crunch and fears of overcapacity has driven down charter rates and reduced demand for new ships.

It currently has an order-book of RM360 million, down from RM702 million in 2009 as a result of a slowdown in orders due to overcapacity of marine vessels from major expansions prior to the 2008 global financial crisis. Going forward, MME is expected to ride on the current strong price of crude oil, which should lead to increased production and exploration activities.

Petronas is planning to spend RM250 billion in capex over the next five years and the government’s thrust on the oil and gas sector under the Economic Transformation Programme should auger well.

MME’s shipyard is located on 21.2 acres in Telok Gong, next to South Port in Port Klang, with capacity to add another adjacent 50 acres. It has approximately 2,800 ft of water frontage and water depth of up to 60 feet. The company offers shipbuilding, ship repair and ship conversion services. It is active in the construction of anchor handling tugboats and supply vessels for the oil & gas industry, where it is capable of constructing vessels of up to 120 m long with 10,000 DWT and 12,000 BHP. MME traditionally delivers about 6 to 7 vessels per year.

Source/转贴/Extract/: InsideAsia
Publish date:11/03/11

Salcon Buy recommendation (NRA)

Salcon Berhad
Current Price: RM0.62
Target Price: RM0.75

Business Summary : Investment holding company involved in water and wastewater treatment, raw water transfer via concession and O&M contract, as well as water construction


1. Investment Highlights/Summary

 Salcon is an engineering specialist offering comprehensive end-to-end services in water and wastewater treatment. Salcon currently owns and operates 7 water concessions and 2 wastewater concessions in China and Malaysia. It also has an effective stake of 36% in Binh An Water Corporation Ltd. which operates under a concession agreement to treat and supply water in Vietnam.

 The Concession segment has been generating steady, recurring profit. We believe its current profit base has yet to reflect the full potential and the design capacity of the Concession segment, as some of its WTPs have yet to commence operations.

 The reduced stake in Salcon Asia will result in earnings dilution in the short term, but the doubling in production capacity will be more than enough to compensate for the earnings dilution.

 The unbilled portion of RM436m will sustain Construction segment profit for the next 1-2 years.

 The stock is currently trading at its NTA of RM0.62/share, which does not reflect the promising long-term prospects of its growing concession-based business in China. Based on our adjusted NTA taking into account the exceptional gain of RM60.1m, its adjusted NTA would increase to RM0.75/share.

2. Company Background/Overview
Salcon is an engineering specialist offering comprehensive end-to-end services in water and wastewater treatment, having successfully completed more than 800 water and wastewater projects both locally and overseas. It currently owns and operates 7 water concessions and 2 wastewater concessions in China and Malaysia. It also has an effective stake of 36% in Binh An Water Corporation Ltd. which is a concession holder to treat and supply water in Vietnam. Its water concessions in China are located mostly in coastal cities, namely Changle County, Nanan City, Haining City, Linyi City, Yizheng in China.

- Key areas of operation
The principal activities of Salcon can be divided into the following categories:

 Concessions;
 Construction; and
 Others

A. Concessions
Salcon is involved in the design, construction, operation and maintenance (O&M) of water treatment plants (WTPs), wastewater treatment plants (WWTPs), sewerage treatment plants (STPs) and raw water transfer projects in Malaysia and China.

 O&M of water treatment facilities in Negeri Sembilan
Salcon operates 2 WTPs in Sg Terip and Kuala Jerai with a total capacity of 360 MLD.

 Concessions in China
Salcon currently owns and operates 6 water concessions and 2 wastewater concessions in China

 Concession segment as a whole accounted for 22.1% and 67.4% of Group turnover and EBIT in FY10.

B. Construction
Salcon is also in the design and construction of WTP, non-revenue water (NRW) works, wastewater and sewage treatment plants.

As at end-FY10, its current orderbook stood at RM1.3bn, with unbilled portion of RM436m. This translates into a turnover cover of 1.6x based on the turnover of RM271.8m for its construction division for FY10.

C. Others
This smaller division is involved in trading and services of specialised engineering equipment and high precision components. It is complementary to its core water and wastewater divisions.

D. Associated Companies
40%-owned Emas Utilities Corporation Sdn Bhd owns 90% interest in Binh An Water Corporation Ltd. which is a concession holder to treat and supply 100 MLD of potable water to Ho Chi Minh city for 20 years commencing Aug 1999.

3. Financial Review
Historical Turnover and Net Profit Performance

 FY09 net profit chalked up a strong 150.0% increase to RM22.1m due to a strong construction orderbook, higher recognition of construction income and the steadily rising contribution from its China concessions.

 Although turnover continued to rise by 13.1%, its net profit came in marginally lower by 3.6% in FY10. Segment profit from Construction segment dipped to RM3.6m from RM10.7m in FY09. This was mainly attributed to higher construction cost for its Kota Kinabalu sewerage project due to prolonged wet weather condition. However, this was mitigated by one-off higher trading income and a gain of RM5.9m from the disposal of property in FY10.

4. Recent Developments
 Disposal of 40% stake in Salcon Water (Asia) Limited (Salcon Asia)

In Nov 2010, under a proposed internal restructuring, Salcon created a 99.99%-owned special purpose vehicle, Salcon Asia to own its existing 6 water concession assets that are currently in operations or under construction in China. 2 more concessions namely Yinzheng water and wastewater concessions, currently managed by Jiangsu Salcon Water & Environmental Development Co Ltd will be injected in 2QFY11.

Consequently, Salcon also announced that it had entered into an agreement with Challenger Emerging Market Infrastructure Fund Pte. Ltd. (EMIF) to sell a 40% stake in Salcon Asia to EMIF for RMB238m (RM112.3m) cash. EMIF is an infrastructure fund established by Mitsui & Co and Challenger Financial Service Group (an ASX-listed investment company) which invests in emerging markets infrastructure sector, specifically in China.

The proposed disposal will result in an exceptional gain of RM60.1m. In addition, the net cash proceeds of RM101.1m (net of repayment of borrowings and disposal expenses of RM10m and RM1.2m respectively) will be used for future investment to fund its planned continuing expansion in China. The strategic alliance with EMIF will help to grow Salcon Asia’s water assets to a meaningful size for an eventual separate listing over the medium term.

The proposed disposal, which was approved by its shareholders on the EGM on 21 Jan 2011, is expected to be completed in 1QFY11.

 The CEO, Mr. How See Hok announced his resignation on 4 Jan 2011 on his own accord.

6. Earnings Outlook
 The Concession segment has been generating steady and recurring profit. We believe its current profit base has yet to reflect its full potential and the design capacity of the Concession segment, as some of its WTPs have yet to commence operations.

As shown in table below, the production capacity of its concession in China increased by 29% to 490 MLD as at end-FY10. However, the doubling in capacity of Haining WTP, which was commissioned in 4QFY10, will only impact its P&L in FY11. Furthermore, the additional capacities measuring 475 MLD in total (+97% vs. FY10’s 490 MLD) arising from Changle new WTP (100 MLD), Changle Raw Water (100 MLD), Nan An Raw Water (175 MLD) and Yizheng Water Supply (100 MLD) will only come on stream towards the later part of FY11. The full benefits will only be reflected in FY12- FY13.

 Although Salcon has positioned itself to expand its water assets portfolio more aggressively, backed by the additional cash from the disposal, the reduced stake in Salcon Asia will nevertheless result in earnings dilution in the short term. As shown in the table above, the doubling in production capacity will be more than enough to compensate for the earnings dilution.

 Coupled with Salcon’s operating track record and history in China, it is also well positioned to secure more concessions in China given its pipeline of projects currently pursued.

 The O&M contract of water treatment facilities in Negeri Sembilan will be expiring in Mar 2012 (Kuala Jerai WTP) and Sep 2012 (Sg Terip WTP). We believe that Salcon, as an existing operator since 2002, and its involvement in a NRW project in Seremban and upgrading works for Sg Terip WTP (from 280 MLD to 325 MLD), commands a higher chance of renewing the O&M contract again.

 For its Construction segment, its current orderbook as at end-FY10 stood at RM1.3bn, with unbilled portion of RM436m. This translates into a turnover cover of 1.6x based on the turnover of RM271.8m for its construction division for FY10. Currently, Salcon is tendering/pre-qualified for more than RM3.0bn new jobs. With historical success rate of 20%, this should translate into RM600m new jobs over the next 2-3 years to replenish its orderbook.

On the local front, Salcon is bidding for the RM1.2bn water treatment plant project under the Langat 2 project with MMC Corp Bhd. Other potential areas include the 10th Malaysian Plan (2011-2015) and NRW project, in which Salcon can leverage on its track record and capability in providing a holistic solution to Sandakan, Seremban and Kelantan.

Overseas, Salcon is also looking for projects in India, Sri Lanka, Cambodia, Vietnam and Indonesia.

7. Key Investment Risks
The deadlock in the takeover of all water concessionaires in Selangor will continue to dampen market sentiment on water stocks.

8. Balance Sheet
Salcon’s balance sheet remains healthy with a net gearing ratio of 0.3x as at end-FY10. Taking into account the exceptional gain of RM60.1m (RM0.13/share), its adjusted NTA would amount to RM0.75/share after the completion of the disposal of 40% stake in Salcon Asia.

9. Valuation and Recommendation
We are maintaining our Buy recommendation on Salcon for the following reasons:

 We believe FY11 profit does not reflect the full potential of its various China concessions. The doubling in production capacity towards the latter part of FY11 will only be reflected in FY12-FY13.

 The stock is currently trading at P/Es of 13.9x and 11.4x for FY11 and FY12. It is also trading at its NTA of RM0.62/share, which does not reflect the promising long-term prospects of its growing concessions in China. In addition, the valuation of Salcon Asia is not reflected in its share price. Taking into account the exceptional gain of RM60.1m, its adjusted NTA would increase to RM0.75/share. We believe the stock should at least trade above its adjusted NTA/share, giving rise to a targeted upside of 21%.

Source/转贴/Extract/: Netresearch-Asia
Publish date:10/03/11

Mature Economies Play Catching Up Game; Inflation Still A Concern

By Gabriel Gan

It has been a rather good fortnight for the stock markets, especially with the Dow Jones Industrial Average (DJIA) staying above the 12,000-mark after losing some 400 points in February while the S&P 500, too, reclaiming 1,300 points.

More notable was the recent jobs data that suggests the US economy may be firing on all cylinders this year, as unemployment fell to 8.9% in February while weekly jobless claims numbers have constantly stayed below 400,000 during most parts of February and in the first week of March.

Now that the jobs – especially jobs in the private sector – are returning, it may signal the start of an end to government measures such as Quantitative Easing II etc.

Investors have been very worried about China’s inflation and “overvalued” home prices, resulting in the Shanghai Composite Index (SSE) dropping since last November when it peaked at 3,200 points. The index got a reprieve only in January and started its rally last month.

Despite overhanging worries about rising food prices, home prices and potential social problems, the SSE shot past 3,000 points – a very solid performance – as opposed to the Hang Seng Index (HSI) and the Straits Times Index (STI), which have been underperforming the major indices of late.

Still we must be encouraged by the fact that the STI has gained more than 100 points from its low of 2,965 points reached on 23 February. It could mean that we have reached an interim bottom despite ongoing concerns in the Middle East and North Africa.

In the previous issue of Shares Investment (Singapore), I warned short-term traders to stay out due to ongoing volatility while encouraging those with strong hearts and holding power to start buying simply because it is not often that we experience 7%-8% falls within such a short period of time. The stock market indices shot up strongly as blue chips gained but most counters were see-sawing with no clear direction although most stocks gained from then till now.

What has changed from then till now? What are the new themes? Have we seen a bottom?

Comparing A Fortnight Ago
In all honestly, nothing much has changed from a fortnight ago when the conflicts in the Middle East and North Africa broke out. The current rally is very much technical in nature not unlike previous corrections where rebounds took place after excessive selling.

The only obvious change has been the improvement in US economic fundamentals, with specific reference to the jobs market, and China’s new policy in the near- and long-term.

Just a fortnight ago, we did not hear of more interest rate hikes until recently when the European Central Bank hinted that it may have to do so sooner rather than later, which is something I have warned of earlier this year when I said that Europe and then the US would have to start raising rates soon so that inflation does not become a problem later.

At the moment, inflation is still non-existent but high oil prices arising from the conflict may fuel an unwelcomed inflation unless oil prices start to come down.

Theater of Sino-US Relations
The change in the attitude of the European officials towards inflation aside, another change that we should be looking at is the development of China’s domestic policies and international relations, which will carve the landscape of China’s future.

If China were to curb growth, does it mean that its appetite for resources will slow down?
On paper, it seems that its appetite for resources and other raw materials will come down but what will happen to its 10 million units of cheap housing units and railway projects? These projects are seen as the top priority and it will need more, and not less, resources such as steel, coal, copper etc.

By constantly nagging about the undervalued Renminbi, the developed countries have now secured a small victory when China said that it would import more goods than it exports so as to address the issue of global economic imbalance.

But will the Renminbi appreciate when China has less foreign reserves and imports more? On the surface it seems that China’s currency is the problem but in actual fact, it seems that the developed countries are just trying to export their way out of trouble, hoping that the 1.3 billion Chinese can buy more.

Finally, Sino-US relations pertaining to international trade will continue to pan out in the near future that will shape the new landscape now that the Chinese government has decided to import more so that the developed economies can benefit from Asia’s growth.

Remain Cautious About “Jasmine Revolution”
The jasmine flower emits a fragrance liked by many people, especially those who love jasmine tea but the Jasmine Revolution smells of bloodshed that has yet to come to a conclusion.

While stock markets want to rally because of improving US economic fundamentals, the conflicts and rising oil prices have acted as a deterrent that forces investors to reconsider. It will be risky to invest heavily considering the contagious effects that the revolution would have on the major OPEC countries hence it is better to remain cautious and buy into dips as opposed to adding to portfolio on market strength.

After all, we have had a decent rally and the STI has reached 3,100, the SSE has flirted with 3,000 and the Hang Seng Index close to 24,000. The only way for these indices to break the resistances is for oil prices to come down sharply on a conclusion of the widespread conflicts

Publish date:11/03/11

The ROE Way To Investing

11 March 2011
The ROE Way To Investing

Return-on-equity (ROE) is a very useful financial ratio for picking stocks that is often overlooked by new investors. In its simplest form, ROE is a company’s most recent full year earnings divided by the average equity during the four quarters. In both the SharesInvestment publication and, for simplicity, ROE is defined as latest full-year earnings divided by the shareholders’ equity in the final quarter of the corresponding financial year. An ROE of 15 percent tells us that the company’s management generates an after-tax return of 15 cent for every dollar that shareholders have invested so far.

There can be many reasons why a company has a high ROE. But instead of describing it in plain words, let us use of more financial ratios. ROE can be broken down into three components namely, net profit margin, asset turnover and financial leverage. This is also known as DuPont analysis.

The relation between ROE and the three components are shown here:
Return-on-Equity = Net profit margin * Asset turnover * financial leverage

Return-on-Equity = Net Income / Equity = Net Income / Sales * Sales / Total Assets * Total assets / Equity

By using some cancellation, the product of the three components becomes ROE. Presented this way, it is more apparent where the source of a company’s profitability lies. A company that can charge more per unit of product sold, or keep its cost per unit down, will have a higher net profit margin and hence a higher ROE. A higher ROE can also be achieved if the company can generate more sales per total asset deployed. Alternatively, management can generate higher ROE simply by resorting to borrowing more, which adds to a company’s total asset base.

For Example
Let us use an example to reinforce what has been discussed so far. Here, I have pulled out financial figures for the past 6 full financial years of Noble Group and Olam International. Their businesses are comparable, although their financial year-end and product focus are different. Both are supply chain managers but Noble focuses on “hard” commodities and Olam on the “soft” types.

The average ROE of Olam over the past 6 years is higher than Noble’s by close to 100 basis points. A 1 percent is too close to call which company is doing a better job at working shareholders’ monies. Using DuPont analysis reveals something much more meaningful.

By breaking down ROE into its components, you can see that Olam’s average net profit margin is higher than Noble’s by 121 basis points. This could be due to the fact that Olam has managed to market itself as the “brand behind the brands”, and that creating product differentiation for “hard” commodities such as coal is impossible.
You can see too that Olam’s average asset turnover is almost half of Noble’s. This is often the case, as businesses with higher margins need lesser sales volume and vice versa.

However, the key insight from this DuPont analysis is that while both have almost similar ROE, Olam’s average financial leverage is much higher than Noble’s. Said differently, if we were to judge which commodities firm’s management is making shareholders’ monies work hard, it would be Olam solely on the basis of average ROE. But if we were to adjust average ROE for financial leverage used, the winner would be Noble Group.

Quick! Tell Me How To Invest Already!
Successful long term investing is really about buying good companies, if not great companies at cheap prices. In the context of what has been written so far, it means buying a company that consistently generates a decent ROE at a cheap price.
Decent and consistent ROE! Margin of Safety!

Arguably the world’s most famous long term investor – Warren Buffet is often known to look for companies that consistently generates an ROE of at least 10 percent, while buying them with a margin of safety. The latter often is taken to mean that the company’s stock is trading at two-thirds of its book value.

Voila! The secret to successful long term investing is thus buying companies that have an optimal combination of both consistent ROE and low Price-to-book (PB) ratio. Why is that so? This is because stocks tend to move towards their book value in the long run, which in turns bump up an investor’s ROE, even if the company’s ROE maintains constant.

In the Warren Buffet quote, let’s assume such a company exists, generating 10 percent ROE, while trading at two-thirds book value or PB of 0.67 times. If the company maintains its ROE of 10 percent subsequently, but its stock price move towards its book value, meaning PB of 1, the investor would have got an ROE of about 15 percent (10 divided by 0.67).

The evidence that using an optimal combination of ROE and PB will lead to good investment returns is very strong. Local business writer Teh Hooi Ling has found that by investing in stocks with the highest ROE/PTB every year between 1990 and 2006, and holding each portfolio for a year, an initial investment of $100 could turn into $34,000 over the past 17 years. That is a compounded return of 41 per cent a year!

Caveat Emptor
If only successful investing were so easy. Earnings quality differs from company to company due to different accounting treatment and management discretion.

As I write this, there are a few companies that are suspended after having difficulty finalizing their results. Some of them prior to suspension had low PB ratios and good ROEs, albeit declining rapidly. Those blindly using the ROE-PB method might have ended up with these stocks, much to their detriment. Those more fortunate may just end up with less than satisfactory investment returns.
So always do your homework before buying any potential gems uncovered by the above method, or you may well end up with a dud.

Publish date:11/03/11

High-speed, high-cost rail

The Star Online > Business
Saturday March 12, 2011

High-speed, high-cost rail


Why we should look for cheaper alternatives before embarking on an expensive rail link to Singapore

STRANGELY, one reason given for a high-speed rail link between Malaysia and Singapore is that it will increase property values in Kuala Lumpur.

The way it is phrased is interesting, “unlock property values in Kuala Lumpur.” Tell me, who locked property values in Kuala Lumpur in the first place? Perhaps that is key to understanding this convoluted logic.

I can understand that it reduces travel time between Kuala Lumpur and Singapore considerably by land that is. I can see how it might might improve tourist arrivals here, though I don't see why the ingresses into Malaysia right now are insufficient.

Thailand and Indonesia don't have high-speed rail links to anywhere but that has not stopped a burgeoning in their tourist arrivals. In fact, the easiest access to these countries continues to be by air. Lack of rail links has certainly not hampered Bali, for instance the planes make a beeline to it.

The Government through one of its agencies, the Public Land Transport Commission, expects to finish a feasibility study in eight weeks. But let's do a back-of-the-envelop, quick feasibility study here, which may take, oh, about eight minutes.

The cost, we presume before land acquisition and rolling stock (trains to you and me), is expected be RM8bilRM14bil. Let's take the upper end, because by the time all approvals are obtained, that's how much it will cost and add to it a further RM6bil as land acquisition and contingency costs.

That brings the figure up to a nice neat RM20bil. And let's say we need a return on this of 10% a year. That means a net profit of RM2bil a year, a huge amount which only a handful of public-listed companies achieve. And let's say that takes a revenue of 10 times that or RM20bil a year!

That RM20bil is less than the entire revenue of both AirAsia and Malaysia Airlines in a year, implying that we will not in the near future get anywhere near the revenue required to make this rail link profitable on a standalone basis.

Conclusion: It is not commercially viable.

That's why advocates are touting its advantages such as “unlocking” KL property values, increasing tourist arrivals, reducing travel time to Singapore and, in short, becoming a significant contributor to the economy.

Let's take each of these reasons in turn. First, why would a faster link to Singapore result in higher property prices in Kuala Lumpur? Is anyone going to relocate to Kuala Lumpur and commute from KL to Singapore daily? Yes, we agree with you it's a bit far-fetched. Anyway, why do we want to increase property prices in KL? From a Malaysian's point of view, they are already expensive.

As far as tourist arrivals are concerned, cheap fares will get them in faster than a fast, expensive rail ticket. Just let more low-cost airlines come in and let them set up hubs wherever they want.

Yes, time to travel to Singapore will reduce. Advocates say it will be 90 minutes but clearly they have not taken into account immigration procedures. This is not the European Union where they don't check passports. Add 30 minutes for this.

And yes, it takes time to get to the station, let's say 15 minutes. Add these two up to 90 minutes and you get two hours and 15 minutes.

By air, it takes perhaps three hours because people need to get to the airport an hour earlier at least and travelling time is a further 45 minutes to an hour from KL to the international airport.

But, there is a way to cut that time down. Simply make Subang the airport from which to fly to Singapore. That saves 15 minutes. Next, cut check-in time to half an hour before flight if you have no check-in luggage. That's 45 minutes saved.

And, presto! That brings the travel time to the same two hours and 15 minutes and let's not quibble about a few minutes here and a few minutes there, you know what we are getting at.

Even if we are very generous, we may need just RM200mil to upgrade facilities at Subang, which can already take the biggest jets. That's just one per cent, yes one per cent, of RM20bil.

Why don't we do this? Perhaps it is the cost RM200mil is a lot less and a lot less sexier than a massive RM20bil, which is hundred times more. It's just too cheap to be of interest to anybody but for the likes of Tony (you know who), low cost is big money.

Just one last point can anyone tell me where our RM20bil plus double-tracking project has got us so far?

● Managing editor P. Gunasegaram laments the appalling lack of analysis, intended or otherwise, in the way we spend billions on our infrastructure.

Source/转贴/Extract/: The Star Online
Publish date:12/03/11

Tsunami hits global equity markets

The Star Online > Business
Saturday March 12, 2011

Tsunami hits global equity markets


PETALING JAYA: A severe earthquake and tsunami that hit Japan late yesterday afternoon was the latest shock to send tremors throughout global equity markets, a day after many of them reeled from a sell off on Thursday.

Asian markets, which were lower throughout the day on concerns of political unrest in the Middle East, reacted to Japan’s 8.9 magnitude earthquake in the last hours of trading, accelerating losses.

Meanwhile, equity markets in Europe opened in the red, as the world now waits to assess the damage Japan’s earthquake would have on the global economy and markets. (See Page 15)

Global equity markets will remain volatile next week, as the latest incident adds to a series of incidents that will continue to spook investors, which included the political unrest in the Middle East and the resurfacing of euro-zone fiscal woes.

As at press time, a tsunami alert had been issued for New Zealand, the Philippines, Indonesia, Papua New Guinea and Hawaii.

Japan’s Nikkei 225 index closed lower by 1.72% yesterday, hitting a five-week low. Macquarie Group Ltd said in a research report issued yesterday that “inevitably there will be microeconomic disruptions” although the impact would be lower than that of the last major earthquake, Kobe, that hit Japan in 1995. Japanese stocks fell 8% in the week after that quake.

“Despite the scale of the disaster (yesterday), it is hard to find much evidence in the macroeconomic data of the effects of the Kobe earthquake. Industrial production dipped 2.6% month-on-month in January 1995 and then bounced 2.2% in February and a further 1% in March. Gross domestic product growth was 3.4% quarter-on-quarter annualised in first quarter of 1995,” the report said.

Macquarie added that the Japanese currency did not move significantly at the time, although it rose in subsequent months to a peak of just past ¥80 per US dollar in mid-April, but this did not seem to be related to the Kobe earthquake (there was significant trade tension with the US at the time).

“Significant yen repatriation that could push the currency higher and, at an extreme, disrupt global markets, looks unlikely,” it said.

The yen appreciated against all 16 of its most actively traded peers yesterday, with it trading at ¥82.23 per US dollar against its previous close of ¥82.98.

Other regional bourses also extended losses yesterday, with the South Korea’s Kopsi losing 1.31% to 1,955.54 points, Singapore’s STI down 1.04% to 3,043.49 points and Hong Kong’s Hang Seng Index shedding 1.55% to 23,249.78.

US stocks were also expected to extend their losses as US stock-index futures fell.

Crude oil futures for April traded on the New York Mercantile Exchange saw its prices fall below US$100 per barrel for the first time since early this month as the earthquake forced refiners to shutdown processing plants in Japan.

Meanwhile, the benchmark FTSE Bursa Malaysia KLCI fell 1.40% yesterday, its largest single day fall in over two weeks, driven by heavy selling in selected banking, plantation and telecommunication stocks.

The local benchmark index lost 21.29 points to end at 1,495.62 points yesterday, with losers crushing gainers at 678 to 118 and some 207 stocks remaining unchanged. Turnover was 1.02 billion shares done valued at RM1.85bil. The index hit an intraday low of 1,494.13 points.

Analysts said the sentiment on the local and regional bourses were reflective of the sell down in US equities on Thursday.

Among the banking stocks that were heavily traded yesterday include CIMB Group Holdings Bhd, which shed 6 sen to RM7.98, Malayan Banking Bhd lost 9 sen to RM8.71 and AMMB Holdings Bhd fell 10 sen to RM6.36.

IOI Corp Bhd, Sime Darby Bhd, Axiata Group Bhd, Maxis Bhd and Telekom Malaysia Bhd saw large volumes change hands yesterday. Petronas Chemicals Group Bhd, which fell 16 sen to RM6.56 with 27.2 million stocks traded, also dragged down the index.

Source/转贴/Extract/: The Star Online
Publish date:12/03/11

Friday, March 11, 2011











Source/转贴/Extract/: Oriental Daily
Publish date:12/03/11

















Source/转贴/Extract/: Oriental Daily
Publish date:12/03/11

馬股再跌破1500 外資回流 12只股引青睞

馬股再跌破1500 外資回流 12只股引青睞























Source/转贴/Extract/: Oriental Daily
Publish date:12/11/11


March 11, 2011 21:54




道瓊斯指數跌近1.9%,收在1萬1984.6點,寫下去年8月11日以來新低;S&P 500指數同樣跌近1.9%,報1295.11點,為今年1月以來最低水平。


































Source/转贴/Extract/: 中國報
Publish date:11/03/11

Mapletree Logistics Trust, Saizen falls on Japan quake

Shares of Mapletree Logistics Trust (MAPL.SI) and Saizen REIT (SZNR.SI) fell in Friday afternoon trading as Singapore-listed firms with businesses in Japan came under pressure due to the massive earthquake that hit the country.

At 4:00 p.m., shares of Mapletree Logistics, whose assets include distribution centres in Japan, were down 2.7% at $0.91 on a volume of 1.5 million shares. Its losses exceeded the 1.4% drop in the benchmark Straits Times Index.

Saizen, which has residential properties in Japan, slumped 6% at $0.155 with 2.9 million shares changing hands.

Uni-Asia Finance (UAFC.SI), which has property in Japan, was little changed.

A massive 8.9 magnitude quake hit the northeast coast of Japan, shaking buildings in the capital Tokyo, causing “many injuries”, at least one fire and triggering a four-metre (13-feet) tsunami, NHK television and witnesses reported.

Publish date:11/03/11

CIMB cuts Berlian Laju to trading sell

CIMB downgrades Berlian Laju Tanker (B66.SG) to Trading Sell from Outperform, with a lower target of $0.05. The house notes, the Indonesian government has announced that planned implementation of cabotage requirements from May for offshore oil and gas vessels has been abandoned; (cabotage is the movement of goods between two points in the same country by a foreign-owned vessel).

“Previously, Berlian has banked on the implementation of the cabotage requirements to help it secure some domestic Floating Production storage and Offloading contracts. Abandonment of the cabotage rule could result in a more competitive environment for future FPSO bids.”

Following this change, it says planned listing PT Buana Listya Tama could lose its attractiveness to the market, and investor interest might be impacted.

It adds, the recent sale & leaseback agreement worth US$93 million ($118.3 million) and US$685 million refinancing package could be a “short term gain, long term pain.”

Shares are down 10% at $0.045.

Publish date:11/03/11

PhillipCapital Market Watch 11032011

Source/转贴/Extract/: youtube
Publish date:11/03/11


Created 03/11/2011 - 18:30























英美煙草(BAT, 4162, 主板消費品組)及PPB集團(PPB, 4065, 主板消費品組)成為全場領跌股。

種植股面臨龐大賣壓,吉隆坡甲洞(KLK, 2445, 主板種植組)、巴都加灣(BKAWAN, 1899, 主板種植組)及IOI集團(IOICORP, 1961, 主板種植組)無一幸免。









Publish date:11/03/11

Patience could be key to capital upside

Business Times - 11 Mar 2011

Patience could be key to capital upside


WITH last year's trading euphoria quickly dissipating amid a fragile investing backdrop, it is no wonder investors are jittery, a mood that has triggered a broad sell-down in equities. So far the Straits Times Index (STI) has lost more than 3 per cent year-to-date.

From a short-term technical standpoint, we are currently on shaky ground. Admittedly, based on past market price activity and chart patterns, technical analysts are currently expecting a reversal pattern any time now that could bring the STI under the 3,000 mark.

But from a longer-term fundamental point of view, is this really the time to sell and hoard cash in bank accounts that pay minuscule interest rates, or should investors plant money into recently shunned equities?

But first a quick look at last quarter's results and how they have played on the overall health of the local equities landscape.

Singapore-listed companies generally posted fairly good numbers in Q4. The key sector that outshone the rest was offshore and marine (O&M) due to fatter margins from bigger projects, while sectors that missed out on the upside comprised mainly property developers, exchanges and shipping.

Real estate investment trusts (Reits), which garnered a fair bit of attention last year due to heightened interest in yield plays, did not disappoint in Q4, though worries over rental reversions and increased risks in ventures out of Singapore continue to colour the sector in general.

Banks fared within general consensus, though they did not really surprise much on the upside. They continued to face margin pressure and cost pressures, though these negativities were offset by greater fee income and strong trading gains (of which the latter is not typically characteristic of the last quarter of the year).

On the other hand, margin pressure was slightly alleviated within the telecommunications sector, which enjoyed strong mobile revenue growth and greater data revenue on the back of growing smartphone penetration rates.

All in all, the real situation does not look as bad as recent sell-downs suggest. Looking ahead, the markets can be expected to spend this quarter 'nursing their wounds'. The US Federal Reserve's latest round of quantitative easing measures is likely to cause commodity prices to rise and accentuate income gaps. All of which could fuel commodity hoarding and create an array of social issues. And the Middle East and North Africa crisis poses a major key risk - oil.

Crude oil prices, which have taken on a life of their own, could produce a plethora of negative spillover effects. For one thing, higher energy prices will almost inevitably trigger a spike in inflation expectations around the globe. In developed economies, deflation may be the net impact while in emerging markets, inflation might soar, forcing the hands of local governments to further tighten monetary policies.

That said, Asia seems better equipped to deal with inflationary pressures. After all, it beats being in debt and facing slow to no growth. Companies would typically find a way to pass costs to consumers as long as consumer demand in Asia remains stable. In fact, inflationary environments tend to spur corporate earnings and bolster banks, prompting analysts' upgrades. All of which is good for equity prices.

In fact, the second half of 2011 would perhaps be an interesting time to look out for as equity valuation multiples can be expected to spiral upwards in Singapore and the rest of Asia.

Key sectors that may prove good for our 'pockets' include banks, O&M and plantations. Index-wise, the STI can be expected to play 'catch-up' in the latter half of the year as we feel valuations are still conservative and markets could pick up when interest in Asia regains traction.

So the best way to approach the market? Take a backseat for a while and observe. Diligence in picking stocks with sound fundamentals and patience could perhaps be key to capital upside in the year to come.

Publish date:11/03/11

HPH Trust IPO - not as big but still the biggest

Business Times - 11 Mar 2011

HPH Trust IPO - not as big but still the biggest

In highest-priced scenario of US$1.03, it could raise up to US$5.6b instead of US$5.8b


(SINGAPORE) The ceiling for Hutchison Port Holdings Trust's initial public offering (IPO) may have been lowered, based on talk that its offer price range has been narrowed.

According to reports from wire agencies, the price range for the trust that will hold Hutchison Whampoa's port assets in Hong Kong and southern China has gone from a minimum of US$0.91 and a maximum of US$1.08 to a new minimum of US$0.99 and a maximum of US$1.03.

In the highest-priced scenario of US$1.03, the IPO could raise up to US$5.6 billion instead of the previous maximum of US$5.8 billion. Even then, it will be Singapore's and South-east Asia's largest-ever IPO.

Petronas Chemicals' US$4.1 billion IPO last year had held pole position as the largest one in South-east Asia. Its offer price of RM5.20 per share for institutions had been at the very top of its reported indicative price range of RM4.50 to RM5.20.

The news of the trust's narrowed price range followed reports on Wednesday that bankers would be closing the institutional book for the offering one day early - yesterday - because the institutional offer had already been oversubscribed.

Cornerstone investors have committed US$1.62 billion to the IPO, including US$100 million from Temasek Holdings.

With the new range priced just slightly above the middle of the old range, it has been a case of glass-half-full or half-empty for analysts.

Marine Money Asia analyst Rodricks Wong described it as 'around the upper band of the previously announced indicative price range' which showed the investors' demand for a more competitive yield.

Based on the old price range, the predicted distribution yield for 2010 had been between 5.5 per cent and 6.5 per cent. The new range would make the yield range from 5.8 per cent to 6 per cent.

The old yield range had previously been deemed 'not as attractive' by Mr Wong. 'Shipping trusts - arguably HPH Trust's closest comparables -? for example easily trade in projected yields in excess of 8 per cent this year,' he said.

Another analyst who declined to be named, however, said: 'If you look at the range that they have narrowed down, it is actually at the mid-section of the range, obviously reflecting some strength but at the same time it's not at the high end of the range. Usually, for very hot deals, they would be at the high end of the range.'

While the reported oversubscription shows that 'institutional investors are still firm believers of the China growth story', according to Marine Money Asia's Mr Wong, he noted that the IPO had not been fully underwritten by all the participating banks.

'The sheer size of the IPO is, of course, the immediate explanation one can think of, but at the same time this could also mean that the investment banks are still very much wary of the macro-fundraising environment - possibly due to the turmoil in the Middle East - and are more cautious when committing to underwriting allotments,' he said.

While the trust will be traded in US dollars, its distribution will be paid out in HK dollars and misgivings over the currency have continued.

'(The HK dollar) is pegged to the US dollar which is depreciating. Even though you might say that 2012's dividend will be higher, if you're giving it out in HK dollar, naturally your capital will start to depreciate. That means that your share price will start to depreciate,' said Jason Chiang, a consultant with Drewry Maritime Services (Asia).

DBS, Deutsche Bank and Goldman Sachs are joint bookrunners and issue managers.

Publish date:11/03/11

Asia stocks drop after big quake hits Japan

On Friday 11 March 2011, 15:33 SGT

By Saikat Chatterjee

HONG KONG (Reuters) - Asian shares dropped after a massive earthquake hit Japan , including the capital Tokyo, darkening an already bleak mood caused by weak economic data and unrest in Saudi Arabia .

The quake struck just before the close of Tokyo stock trading. Japan 's Nikkei average closed at an intraday and five-week low, down 1.7 percent on the day.

The Hong Kong 's Hang Seng share index was down 1.8 percent, and Nikkei futures in Singapore tumbled more than 3 percent. At 0650 GMT, Nikkei June futures were down 2.8 percent at 10,075 .

The magnitude 8.9 quake shook buildings in Tokyo, causing "many injuries" and triggered a four-metre (13-ft) tsunami, NHK television and witnesses reported.

The yen extended losses against the dollar after the quake, falling to 83.29 yen to the dollar compared with 82.80 before it struck.

Brent crude held near $115 per barrel as investors monitored developments in the Middle East. Forces loyal to Libyan leader Muammar Gaddafi battled rebels at an oil port, while Saudi police fired in the air to disperse protesting Shi'ites.

Oil prices are up by a quarter this year, with most of the gains coming since the Libyan crisis erupted.

While oil prices around this level posed no substantial threats to the world economy or financial markets, the risk that prices may rise to damaging levels has risen substantially, Barclays Capital strategists said.

Chinese inflation in February remained close to 5 percent, suggesting tighter monetary policy may be needed, adding to the uncertainty.

Key stock indexes in Australia and South Korea closed down more than 1 percent each. The broader Asian market outside Japan was down 1.4 percent, extending its drop by more than 3 percent for the week as fresh outbreaks of violence in the Middle East kept markets on edge.

Weak U.S. economic data spurred some profit taking in shares in developed markets which have enjoyed a handsome run this year, though some bargain buying checked losses.


Overnight, a weak Wall Street which ended down nearly 2 percent. The S&P 500 is up by a third since last July.

"It is another day of reducing risk across the portfolio. We have had it one way for too long and with big issues hitting, everyone is running to the exit at the same time," Chris Weston, an institutional dealer at IG Markets said.

In credit markets, sovereign credit default swap spreads pushed wider, reflecting the general risk aversion sentiment.

Shanghai copper rebounded but was on track to post its biggest weekly loss since May 2010 while London futures were looking at their worst week since last June, dragged by worries of high oil prices hurting the global economy.

The yield on benchmark 10-year notes slipped to 3.36 percent, down from 3.56 percent hit earlier this month.

In currency markets, the euro stayed weak after having suffered its biggest one-day fall against the dollar in a month, and further losses may loom if a euro zone summit fails to soothe market nerves on sovereign debt.

Any disappointment could heap more pressure on the single currency, which slid to one-week lows near $1.3770 overnight. It last traded at $1.3810 .

Publish date:11/03/11

Japan hit by monster 10-metre high tsunami


TOKYO: A massive 8.9-magnitude earthquake hit Japan today, unleashing a monster 10-metre high tsunami that sent ships crashing into the shore and carried cars through the streets of coastal towns.

Many injuries were reported from Pacific coastal areas of the main Honshu island and the capital Tokyo, police said, while TV footage showed widespread flooding in the area. One person was confirmed dead.

A powerful 10-metre (33 feet) wall of water was reported in Sendai in northeastern Miyagi prefecture, media reported after a four-metre wave hit the coast earlier.

Helicopter footage showed massive inundation in northern coastal towns, where floods of black water sent shipping containers, cars and debris crashing through towns.

Mud waves were shown racing upstream along the Natori river in Sendai city, blanketing farm fields.

In the capital, where millions evacuated strongly swaying buildings, multiple injuries were reported when the roof of a hall collapsed during a graduation ceremony, police said.

Plumes of smoke rose from at least 10 locations in city, where four million homes suffered power outages. Port areas were flooded, including the carpark of Tokyo Disneyland.

The first quake struck just under 400 kilometres (250 miles) northeast of Tokyo, the US Geological Survey said. It was followed by several aftershocks, one as strong as 7.1.

“We were shaken so strongly for a while that we needed to hold on to something in order not to fall,” said an official at the local government of the hardest-hit city of Kurihara in Miyagi prefecture.

“We couldn’t escape the building immediately because the tremors continued... City officials are now outside, collecting information on damage,” she told AFP by telephone.

Prime Minister Naoto Kan quickly assembled his cabinet after the quake hit, and the government quickly dispatched naval vessels from near Tokyo to the worst-hit northeastern area of Miyagi.

The quake, which hit at 14:46 pm (0546 GMT) and lasted about two minutes, strongly rattled buildings in greater Tokyo, the world’s largest urban area and home to some 30 million people.

At least 10 fires were reported in Tokyo, where the subway system stopped, sirens wailed and people streamed out of buildings.

Japan sits on the “Pacific Ring of Fire”, which is dotted with volcanoes, and Tokyo is situated in one of its most dangerous areas.

A tsunami warning was issued for Japan, Taiwan, Russia and the Mariana Islands, the Pacific Tsunami Warning Centre said.

“An earthquake of this size has the potential to generate a destructive tsunami that can strike coastlines near the epicentre within minutes and more distant coastlines within hours,” the centre said in a statement.

It also put the territories of Guam, the Philippines, the Marshall Islands, Indonesia, Papua New Guinea, Nauru, Micronesia and Hawaii under a lower tsunami watch. Indonesia issued its own tsunami warning.

The quake sent the Nikkei share index plunging at the close while the yen fell sharply against the US dollar.

The mega-city of Tokyo sits on the intersection of three continental plates — the Eurasian, Pacific and Philippine Sea plates — which are slowly grinding against each other, building up enormous seismic pressure.

The government’s Earthquake Research Committee has warned of a 70 percent chance that a great, magnitude-eight quake will strike within the next 30 years in the Kanto plains, home to Tokyo’s vast urban sprawl.

The last time a “Big One” hit Tokyo was in 1923, when the Great Kanto Earthquake claimed more than 140,000 lives, many of them in fires. In 1855, the Ansei Edo quake also devastated the city.

In 1995 Kobe earthquake killed more then 6,400 people.

More than 220,000 people were killed when a 9.1-magnitude quake hit off Indonesia in 2004, unleashing a massive tsunami that devastated coastlines in countries around the Indian Ocean as far away as Africa.

Small quakes are felt every day somewhere in Japan and people take part in regular drills at schools and workplaces to prepare for a calamity.

Nuclear power plants and bullet trains are designed to automatically shut down when the earth rumbles and many buildings have been quake-proofed with steel and ferro-concrete at great cost in recent decades. - AFP

Publish date:11/03/11
Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)

乔治·索罗斯(George Soros)



高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
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