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Thursday 30 July 2009

Breakfast Brief: Boustead, Mudajaya ( 31 July 2009)



In yesterday’s Boustead EGM, it intends to raise up to RM1.3bn via rights issue and disposals. Of the RM1.3bn expected to be raised, RM729m will be from its rights issue and the rest from disposal of non-core assets. The funds will be used to pare down borrowings by RM300-400m and expand core operations. We are positive on the plan as:
(1) it will reduce its current gearing of 1.2x to between 0.85-0.96x and interest savings of RM24m annually.
(2) By disposing of its non-core assets such as BH Insurance and its Indonesian plantation operations, it will be better able to channel resources to its core operations in Malaysia such as plantation and property development. Share price (+17% YTD) trades 7x FY10E PE, a 43% discount to mid-cap plantation peers.

Going forward, we expect CPO prices to be highly volatile due to the uncertain global economic situation and ever-changing weather pattern. For exposure to the sector, we like Al-Hadharah REIT for its steady income stream and offers FY10E DY of 9%.

Newsbreak
Genting’s S’pore casino targets to open in early 2010

Boustead expects RM1.3bn proceed from rights issue and disposals by end 2009

Mudajaya secures RM75m contract to build hospital in Pahang

HeiTech Padu secures RM98m contract from National Registration Department

Implementation of Main and ACE Markets on schedule for 3 Aug, says Bursa

UMW aims to grow contribution of O&G division


Economics
Malaysia: BNM expectedly kept its overnight policy rate unchanged at 2% for the third straight rate-setting session, as prevailing policy measures are deemed sufficient to support economic activity.

US: MBA mortgage application fell 6.3% to 495.4 in the week ending 24 Jul, the first drop in a month, as mortgage rates climbed for the second straight week.

US: Durable goods orders also declined more than expected in the month of Jun by by 2.5% compared to 1.3% increase in May, mainly on a steep fall in orders for transportation equipment.

UK: Mortgage approvals climbed to 47,584 in Jun compared with 44,169 in May, the highest in more than a year as banks become more willing to lend.

Tuesday 28 July 2009

Kenanga Today highlight





COMPANY UPDATE

· RCE Capital (BUY; RM0.625; TP: RM0.70) - 10% private placement by August



NEWS HIGHLIGHTS

· AirAsia X fails to get Govt nod for flights to Sydney and Seoul

· Magnum’s jackpot boost

· UM Land expects RM1.2bil from mixed development project

· TM makes Halim chairman

· Lion reviewing Vietnam steel plant venture

· Shell to offer RON95 nationwide next month

· Metro Kajang to buy RM34m land

· Chinese buyer for John Master



FOREIGN NEWS HIGHLIGHTS

· Wall St. ends up slightly in late rally led by banks

· US new home sales rise sharply in June

China State Construction to list Weds

Genting Singapore: BUY (Reinstating coverage) S$0.835


New Starlet in Town;
Price Target : 12-Month S$0.98

・ Reinstating coverage with Buy, S$0.98 TP (sum-of-parts)
・ Proxy to Singapore’s new casino market
・ Leverage on Genting’s strength in mass-market and Universal Studios’
global brand
・ Potential first mover advantage
Proxy to Singapore casino market. Genting Singapore (GENS) has the
largest exposure to Singapore’s US$3b gaming market (89% of SOP,
virtually 100% of 2011 EBIT). Resorts World at Sentosa (RWS) can tap on
Singapore’s existing domestic gaming market, rising regional tourism and
leverage on Singapore’s transformation into a global city.

Synergistic partnership: Genting+Universal Studios. We expect gaming
revenue to come mainly from the more resilient and higher-margin grind
segment (60:40 grind-VIP distribution, almost similar to Genting’
70:30). Universal Studios should help draw in the mass-market to RWS -
differentiating it from Marina Bay Sands’ MICE/business visitors focus
as well as help diversify revenue base (non-gaming: 25-30% of revenue).

Potential first mover advantage. RWS could open earlier than expected,
possibly in Dec 09/ Jan 10 to coincide with the Chinese New Year peak
season. It could overtake Marina Bay Sands (launch postponed to 1Q10
from end-09) - an advantage in locking in local market share (S$2,000
annual pass in lieu of S$100/entry to be paid by Singaporean residents
is exclusive to one casino). RWS’ construction is on-track: 71% of
project cost has been awarded to date with testing/ commissioning of
ride equipments scheduled for Nov 09.

Potential catalysts: a) Award of casino licence in 4Q09 (already
fulfilled requirement of >50% commitment spending and GFA construction),
b) announcement of exact soft opening date, c) encouraging response for
hotel bookings, and d) recovery in UK casino operations.

Sum-of-parts of S$0.98, valuing RWS at S$0.87/share (based on DCF
assuming 7.8% WACC, 1.5% long-term growth). We expect RWS to be
profitable in the first year of operation and earnings to grow at a
5-year CAGR of 37% (assuming no. of tables increase progressively from
500 to 1,000).

Sunday 26 July 2009

IOI Corporation: SELL TP RM4.10


Of Rights and Results


· Following the rights issue trend
IOI yesterday announced a rights issue of 1rights:15shares priced at
RM2.90 (38.3% discount to theoretical ex-rights price of RM4.70) per
rights that if fully taken up, would raise cash of RM1.22bn. The group
plans to use the funds for capex as well as to pare down borrowings.
While they have yet to give the exact utilisation of proceeds, we expect
that at least 50% would go into paring down debts while the remainder to
satisfy planting capex in Indonesia and expansion of their refinery in
Rotterdam. The full issue of shares would cause EPS dilution of 6.67%.
Assuming the group pares down its debts by RM700m, interest savings
would be in the region of RM30m only which is negligible to bottom line.
Net gearing would improve to 14% from 22% expected in FY10. We view
the rights as cheap entry for shareholders into more IOI shares.

· 4Q likely to be soft
IOI has during 9MFY09, achieved a CPO price average of RM2,932 which
has strongly exceeded the MPOB price average of RM2,316. While as of
9MFY09, results still came in within our expectations but we believe that
4Q will prove a softer showing for the Group. MPOB prices have averaged
at RM2,416 for 2QCY09 and we expect that the group would report
numbers closer to this average as the bulk of forward sales would have
been exhausted over 4Q. Hence, we adjust down our FY09 expectations
by 13% to reflect a softer 4Q. To note, our price average for the year is
RM2800 for IOI. We are also adjusting down FY10 (-26%) and FY11 (-
22%) numbers to reflect higher operating cost of RM1050 per MT (RM950
previously) and flattish FFB production growth from existing hectarage.

· Shifting to PE valuation, Maintain Sell
In a volatile market and with equally volatile CPO prices, we see trading
opportunities aplenty for a liquid stock like IOI but at these levels, we view
valuations to be stretched. Looking at PE Band charts of IOI, we note that
since early 2006, the company has been gyrating between the 20-25x
bands and now still trades below those levels. However we do not see
those levels achievable now given the lack of real fundamental drivers for
CPO price to exceed RM3000 again. As such, we peg the group’s FY10
EPS to their average PE of 18x (the average since Jan 2006) and derive a
value of RM4.10 (Previous DCF target RM4.00).

Thursday 23 July 2009

BURSA: Reduce Tick Size To Boost Liquidity In Equities Market


Bursa Malaysia has reduced the structure of tick size or the minimum price variation between the buy and sell price for a stock, effective from August 3.

In a statement here Thursday, it said the tick size was reduced in line with the current practice by global developed markets and more importantly, to create market depth, enable price discovery and boost liquidity in the local equities market.

"Investors rely on information such as tick sizes to estimate future movement of a counter's share price as well as form a gauge of market sentiment," Bursa Malaysia Bhd's chief executive officer, Datuk Yusli Mohamed Yusoff said.



He said the exchange anticipated this reduction of tick size would broaden participation from investors who are poised to provide more liquidity to the local market as investors can enter and exit the market more easily.

In addition, the smaller tick size would also enable investors and traders to take advantage of more trading opportunities with each price movement, however small it is.

"This is more evident with the advent of electronic access or Direct Market Access infrastructure which operates efficiently with smaller tick sizes," Yusli said.

To investors, this revised tick size structure means that the minimum price change of listed securities is now smaller.

For example, currently, a RM5.10 stock is quoted in multiples of five sen which means that the next tick up is RM5.15 and the next tick down is RM5.05.



With the new tick sizes, investors can now quote in multiples of one sen which will now see a RM5.10 stock go up to the next tick which is RM5.11 or next tick down which is RM5.09.

This will create more trading opportunities for both buyer and seller.



Bursa Malaysia said that the equity Exchange Traded Funds (ETFs) on the Main Board would also benefit from the change to a smaller tick size.

Currently, these ETFs have a tick size of one sen regardless of any price. In future, any ETFs below RM1.00 will have a tick size of 0.1 sen and ETFs that are priced between RM1.00 and RM2.995 will have a tick size of 0.5 sen.

For ETFs that are priced at RM3.00 and above, the new tick size will be one sen.

Meanwhile, the bond ETF maintains its extremely small tick size of 0.1 sen.

As to the bidding price for buying-in, Bursa Malaysia said that it would retain the ten ticks.

Arising from this, the buying-in price will be based on the current tick sizes instead of the new tick sizes to ensure that the buying-in price is attractive to potential sellers, it added.

Wednesday 22 July 2009

POS Malayisa - Rejuvenate business model



Price: RM2.15
Target Price: RM3.25
Recommendation: BUY

· POS to revive the mailing business and operation turnaround for higher yield in 2010. We met with the management recently and we are quite comfortable with the management overview on the business turnaround to promote higher efficiency. It is quite promising outlook for POS in FY10 when the implementation kicks in and to clinch with new business venture with strategic partners to boost up its retail segment.

· New Mail Processing Centre (MPC) in 4Q10 to improve operation efficiencies. The new MPC is expected to be in operation by 4Q10 with estimated cost up to RM250m including land and building. It will replace the existing mail centres that serve for Klang Valley area. Upon completion of the new MPC, it will be 60% automated compared to 25% currently. We envisaged the initial outlay of the investment would be minimal, cushioned by proceeds from the disposal of the existing centres.

· Promotes new retail services to leverage on its wide spread post offices in Malaysia. POS launched its new service recently: the 3rd party insurance cover services, in collaboration with its strategic partner, Malaysian Motor Insurance Pool (MIMP). At present, POS is in the midst of finalising the commission entitlement for this service with MIMP which is capped at 10% of the insurance premium. Apart from that, the management is also in talks with local banks to extend over the banking service of micro credit disbursement through the post offices.

· The earnings catalyst is in the limelight. Despite of challenging operational conditions arising from fluctuation in fuel prices, the management is in the midst of negotiation with the government for its new postal tariff structure. The last tariff increase was 12 years ago. An increase would just add straight to the bottom line and is a key rerating catalyst.

· Maintaining our BUY call with target price of RM3.25. No change to our earnings and assumptions as we expect the immediate earnings upside will be the new tariff revision as the mail segment weighs 60% of the Group’s revenue. We projected DPS of 5.7 sen capped at 35% payout for FY09. The group is currently sitting on the net cash position of 35 sen per share.

ASM units sold out


Permodalan Nasional Bhd (PNB) has announced that all remaining Amanah Saham Malaysia (ASM) units have been sold out.
The 1.6 billion units were part of the 3.33 billion additional ASM units announced by Prime Minister Datuk Seri Najib Razak at the 2009 Malaysian Unit Trust Week in Johor Baru on April 20.

Tuesday 21 July 2009

Bursa Malayisa - Proxy for liquidity


Bursa Malayisa - Proxy for liquidity (Results Note)

Price: RM7.25
Target Price: RM9.30
Recommendation: BUY

· Bursa’s 1HFY09 net profit of RM50.5mn was inline with consensus estimates (48% of RM103.9mn) but below ours (36% of RM140.2mn). However, we are not changing our earning forecast as we believe 2HFY09 will contribute 60% of the group’s full year earning with capital market is now in bullish mood.

· Sharply higher 2Q09 on 142% higher Average Daily Trading Volume (ADT). Bursa reported strong 2Q results with PAT of RM35mn (+144%, QoQ). 2Q09 ADT of RM1.49bn jumped by +142% QoQ vs. 1Q's RM0.62bn. Retail participants have increased significantly by 37% for 1H09, bumping up clearing fees to 2.6bps and above (from 2.4bps in 1Q). As per guidance, management delivered its promise to maintain its interim dividend payout at 90%, that translates to 8.83 sen. Net margin improved by 17% to 51% from 34% previously, on the back of operational leverage

· A strong re-rating catalyst. Following our meeting with management recently, we discovered a major structural re-rating catalyst for Bursa. The exchange has submitted a proposal to the Ministry of Finance to remove the current cap on clearing fee charges on institutional trades (Now at RM1,000/trade). We believe this could potentially increase revenue by 15-20% which would translate to a 26% increase in our FY10 net profit estimate of RM163mn or EPS of 30.96sen. We are positive on management's move to remove the earlier ruling on the clearing fee cap which would rise back to 3bps (or 6bps in a two-way trade calculation) from 2.6bps currently. The group also proposed to reduce the minimum change on retailers to RM20 from RM40 currently.

· Only trading at 17.8x FY10 PER. Our sensitivity analysis on the potential downward revision of cap charges is shown below. At current share price of RM7.00, Bursa is trading at 18x-22x PER, which is at 19-33% discount to regional peers' average of 27x. An expected historically weak third quarter in the equity market could present opportunity to accumulate the stock, bearing in mind that the strong structural re-rating catalyst should limit the stock's downside and offer lucrative capital returns.

· We maintain our price target at RM9.30 based on 30x FY10 EPS of RM0.31/share. We are comfortable with target P/E of 30x (vs. Bursa historical average PER of 34x), with stronger ADT backed by the key catalysts of 1) global recession likely to bottoming out in 3Q09-4Q09; 2) corporate earning likely to surprise on the upside as consumer spending is recovering and 3) trading multiple likely to expand on better corporate earnings visibility.

Monday 20 July 2009

AirAsia- More relief for balance sheet


AirAsia- More relief for balance sheet (Company Update)

Price: RM1.22
Target Price: RM1.50
Recommendation: Trading Buy


· Deferment of 15 A320s. Group plans to delay 8 and 7 aircrafts out of the scheduled 24 and 23 deliveries for 2010 and 2011 respectively. The 15 delayed planes will be delivered in 2014. While management confirmed that financings for 2010 and 2011 are in place and attributed the deferments to uncertainty in the new LCCT completion date, we are more inclined to think that the delays are related to its heavily-geared balance sheet.

· Relief to balance sheet and shareholders. We are positive on the plane deferment as this will give a breather to AirAsia’s stretched balance sheet already with a net gearing of 3.7x as of 31 Mac 09. Coupled with the proposed RM500m placement, AirAsia’s FY10 net gearing is expected to reduce to 2.6x from our original forecast of 3.5x.

· Plans to retire B737s and go A320s. Apart from the A320s deferments, group is also looking to dispose 3 owned B737s and retire another 13 leased B737s used by its associates in Thailand and Indonesia. This is not unexpected of as management has always reiterated that it intends to replace all the B737s with its new A320s which are more efficient. AirAsia however needs to find new lessors for the leased planes to avoid penalty from early return of leased planes. Though we believe that it could be challenging to entice buyers or lessors in the downturn, disposal of any B737 is positive as group stands to save leasing, fuel and maintenance costs through deployment of new A320s.

· Merger of AirAsia and AirAsia X? The merger idea which was recently mooted by CEO Tony Fernandes will enable synergies between the short and long haul operation. As an example, the enlarged group could utilise AirAsia X’s plane for the KL-East Malaysia routes during the year end super-peak period without having to seek shareholders’ approval for the related party transaction. As most investors are less familiar to the long haul business and could be resistant to the proposed merger, management has decided to aggressively promote AirAsia X to both local and foreign investors. Nonetheless, we understand that the merger is not likely to materialise in the near term and will largely depend on investors’ acceptance of AirAsia X.

· Placement of 20% new shares for RM500m to be completed in 2H09 and will be allocated for working capital purpose. In addition, group will also receive deposit paybacks for the deferred planes and should end the year with a decent cash balance of c.RM1b.

· Measures to boost ancillary income. Management believes that strong ancillary income is the best buffer against volatile price as opposed to hedging which could involve margin calls. Group recently launched Redbox - a low cost courier service which offers up to 80% price discount compared to other conventional courier services. Other projects in the pipeline include: a) online currency exchange; b) duty free on-line shoppings; c) AirAsia savers account which comes with free flight rewards; and d) Red Megastore – a growing online shopping website which will expand its products range to include various gadgets such as handphones, digital cameras and etc.

· Stable near term outlook. Still strong forward bookings with less last minute ticket sales indicate that more travellers are booking in advance to enjoy cheaper fares. Mounting competition and heavy promotional activities should continue to weigh on yield but benefits load factor. We are adjusting our FY09 and FY10 profit forecasts higher by 1.7% and 1.1% respectively after factoring for lower yield, better load factor and reduced financing cost from the plane delays. Investors’ sentiment we believe has turned more positive towards AirAsia following the deferment plan and proposed share placement. Reiterate Trading BUY on AirAsia with unchanged target price of RM1.50 based on FY09 PER of 9x.

Tuesday 14 July 2009

Asia Market Summary


Rallying in-line with the sentiment across the rest of the global markets, the Asian markets ended Tuesday’s session higher. The sentiment in the region also improved after the Singapore government raised its economic forecast for 2009 to reflect a stronger performance in the second quarter.

Japan’s Nikkei 225 average opened sharply higher and moved sideways for the rest of the session, as bargain hunting triggered by the positive lead from Wall Street helped the index snap a nine-session losing streak and close up 211.48 points or 2.34% at 9,262.

Brokerages led the market gains, while exporters also rose in reaction to the weakening of the yen against the dollar. NEC Electronics closed up about 10% on reports that the company is planning to ramp up the output of microcontrollers.
Australia’s All Ordinaries opened unchanged and spiked sharply in early trading before flattening out. The index ended up 120.80 points or 3.23% at 3,859. Most sectors, barring defensive healthcare stocks, ended higher.
Miners BHP Billiton and Rio Tinto advanced sharply in the session. The four major banks, namely the Commonwealth Bank, National Australia Bank, ANZ Bank and Westpac also saw solid gains.

Hong Kong’s Hang Seng Index opened higher and moved sideways thereafter before seeing incremental buying interest in late trading. At the close of trading, the index was up 631.10 points or 3.665 at 17,886. Forty-one of the forty-two index components ended the session higher, with Hong Kong & China Gas ending unchanged.
The Indian market closed sharply higher and closed near the day's high on Tuesday, helped by firm overseas cues. Short covering by speculators and reports that monsoon rains will intensify in the coming days also influenced trading. The BSE Sensex opened higher at 13,549 and rose to a high of 13,903 before finishing at 13,854, up 453 points or 3.38% from its previous close.

Monday 13 July 2009

STOCK FOCUS OF THE DAY: IOI BUY


STOCK FOCUS OF THE DAY
IOI Corporation : Selling at spot prices BUY

Maintain BUY on IOI Corp (IOI) with lower fair value of RM5.20/share. We have revised our FY09F-FY10F earnings forecasts for IOI downwards by 1% to 2% to account for lower manufacturing profits, after our recent discussion with management. IOI’s oleochemical division is currently facing declining sales margins and volume as the economic slowdown takes its toll on demand for beauty, personal care and cosmetic products. Despite the plunge in crude palm oil (CPO) prices recently, IOI is still positive on prices. We understand that demand for palm oil is stable. Due to IOI’s favourable view on CPO prices, the group is currently selling at spot prices. There are currently mixed views about weather conditions. Operating costs are expected to be either flat or slightly higher than last year. It could range between RM1,100/tonne to RM1,200/tonne in FY09F (FY08: RM1,098/tonne). Although cost of fertiliser has declined compared to last year, other components such as labour and transportation costs have increased.

Others :
Banking Sector : Relaxation in NPL classification will not distort industry data OVERWEIGHT

QUICK TAKES
Indofood Agri : Mulling issuance of Rp1 trillion bonds BUY
AirAsia : Extending out gearing upcyle in growth phase BUY
Rubber Glove Sector : Longer delivery time from shortage of labour OVERWEIGHT

NEWS HIGHLIGHTS
Proton Holdings : Proton plans to tap high-growth regional markets
Financial Services : Kenanga to sell stake in Dubai advisory
Oil & Gas Sector : LNG exports slump, gas demand down / Merapoh’s US$10bil refinery may get 50% funding from foreign banks

PLUS Expressway Bhd - BUY - 13 Jul 2009


PLUS Expressways- Interim solution for toll rates issues… (Company Update)

Price: RM3.18
Target Price: RM3.78
Recommendation: BUY

· A 20% discount for motorist who pays toll 80 times a month. The Prime Minister announced that a 20% shall be given to the motorist who pays toll more 80 times a month through electronic payment ie: Touch N Go and Smart Tag. This is the interim solution for the toll rates issues whilst the final decision is still under review by the Economic Planning Unit (EPU). The discount is effective from 1 September 2009.

· The interim solution will not undermine the earnings. We opined that the threshold of paying toll more than 80 times a month is generally high especially for Class 1 vehicles and the main beneficiaries are likely to be commercial vehicles. However, we are unsure the implementation of the electronic payment at the existing manual lanes for commercial vehicles. We envisaged that impact to the earnings is considerably minimal. On the positive note, the implementation of electronic payment will reduce the operating cost and the penetration rate is still low at 48%.
· EPU still looking at the solution. Our views on the EPU solution remained unchanged, neither the nationalisation of PLUS nor privatisation via Khazanah (64% stake). In our opinion, any amicable solutions to the toll rates issues will definitely address the toll compensations either cash compensation, supplemental agreement or further extension of concession period, which collectively will have a neutral impact to our derived net present value (NPV).

· Traffic volume is still defensive. YoY, May 09’s traffic grew by 1% despite the slower economic environment. We expect PLUS would be able to achieve 3% traffic growth in FY09. We believe that the deferment of the 10% toll hike this year, somewhat eliminates the traffic contraction whilst the government have been a good pay master to compensate the differences. As at 1Q09, PLUS have received a sum of RM93m or 50% of FY09 toll compensation from the government.

· We are maintaining our BUY call with target price of RM3.78. Pending further information regarding to the new discount scheme, we are maintaining our target price at RM3.78 as we believe it would not materially impact the earnings. The management is committed with 16sen dividend per share which translates to 5% yield at the current price and remains attractive for the dividend play.

Saturday 11 July 2009

Commodities warning from Credit Suisse


One of the most alarming datapoints for me this week relates to distillate oil (diesel and heating oil). Distillate demand slumped by an unprecedented 14.9% in Q2 and the July figures indicate a 27% drop although this is only one week worth of data. To add fuel to the fire, the DOE inventory data showed yesterday that distillate stocks reached their highest level in 25 years after a rise of 3.7 million barrels compared to consensus of an increase of 2 million barrels.

Why am I suddenly growing paranoid over distillate? You see, our oil analysts are telling me that distillate is a reliable coincident indicator of industrial production since it reflects activity in trucks, rail and agriculture (they even have a spectacular chart showing this relationship). Unfortunately, this datapoint seems to contradict our house view that industrial production is going to improve sharply.

Of course, this could well bounce in the coming weeks so it's too early to give up on the idea of a V-shaped recovery, but it seems equally foolish to put too much faith into this "all is well" scenario too.

My recent recommendation to short Japex (1662) has come out of the gate strongly and I think there is more to go in this trade. The other stocks that are shaping up to be excellent shorts are Isuzu (7202) and Hino Motors (7205).

Trucks are the biggest consumers of distillates, we recently learned that June medium truck sales were the worst since 1991, and the charts are getting as ugly as it gets. In any case, we need to keep an eagle's eye on this distillate demand datapoint in the coming weeks.

Thursday 9 July 2009

Rubber Gloves Sector : Clever strategy to fill earnings vacuum OVERWEIGHT


SECTOR FOCUS OF THE DAY
Rubber Gloves Sector : Clever strategy to fill earnings vacuum OVERWEIGHT

We expect a still robust outlook ahead for rubber glove manufacturers. Our checks reveal an increase in demand, with order flows accelerating as customers take advantage of current cheaper priced products, notwithstanding the vacuum created by closure of some competitors due to the economic downturn. All in, we see a still positive outlook for glove manufacturers given strong fundamentals with both glove manufacturers under our coverage projected to deliver 3-year earnings CAGR of 16%-17%

. Coupled with our recent recommendation, which upgraded Top Glove from a HOLD to a BUY, we would now advocate an Overweight stance on the sector. Both Top Glove and Kossan have consistently delivered within our expectations in the past and their respective share prices have outperformed the KLCI year-to-date. In line with our revised target market PE of 15x, we have now pegged Top Glove’s FY10F earnings to a higher PE of 13x (previously 11x) and Kossan’s FY09F earnings to a higher PE of 11x (previously 9x). Kossan’s PE is at a discount to Top Glove owing to its smaller market capitalisation and lack of trading liquidity.

We deem the valuation fair given that both Top Glove and Kossan’s PEs are still below their respective 7-8 year average historical PEs (See Chart 3). While we like Top Glove for its leadership status and good prospects for sustained growth going forward, we also like Kossan as it offers greater room for capacity-driven growth off a smaller production base and a higher premium production mix on the back of high capacity utilisation rate.

BUY both Top Glove (FV:RM8.70/share) and Kossan Rubber (FV:RM4.90/share).

Wednesday 8 July 2009

Property Sector: Take on proposed tax change


Singapore's Ministry of Finance (MOF) has proposed a potential change in the income tax laws related to property. If the law is passed in Parliament, it will impact disposal of properties from 1 Jan 2010 onwards, if the seller had sold another property 4 years prior.

To sum up the gist of the matter, it provides clarity and certainty as to what may or may not be taxable under the current income tax regime, when said income includes income derived from the sale of properties. Anyone who sells only one property in a 4-year period will not be taxed on the profit;

if a second one is sold, the profit may then be taxable, based on the facts and circumstances of the second sale, which is similar to the current tax regime. Even under the current regime, the taxman could already come after such capital gains if the assessed individual is deemed to be a property trader that derives income from the purchase and sale of multiple properties.

Genting - Opening of Marina Bay Sands Delayed - BUY


Genting - Opening of Marina Bay Sands Delayed (Company Update)

Price: RM5.70
Target Price: RM6.68
Recommendation: BUY

· Marina Bay Sands delays opening. Sands’ chairman Sheldon Adelson announced that the opening of Marina Bay Sands will be delayed to early 2010 from the original end 2009 dateline. This is not a surprise as the project has been behind schedule for several months due to shortages of labour and building material especially sand and steel.

· Meanwhile, Resorts World@Sentosa has reiterated in various analyst and press briefings that it is on track for soft opening by 1Q2010. The opening features will include Universal Studios, casino and four hotels. Though the official opening date has yet to be confirmed, management guided that group will have a clearer idea of the opening date come 3Q09.

· RWS to open earlier than Marina Bay Sands? Subsequent to the project delay in Marina Bay, we believe that RWS is likely to gear up construction works to open before Sands in 2010. As of 31 Mac 09, RWS has awarded c.S$4.67b works out of the S$6.59b project costs. Installation of various fun equipments in Universal Studios has begun while testing and commissioning is scheduled to begin in Oct 2009.

· First mover advantage for RWS should it be the first to open. The opening of the first Integrated Resorts (IR) in Singapore will definitely be a major event of the year and is expected to draw large domestic and foreign visitors on novelty effect. In addition, the first IR is also poised to lock-in more casino patrons as seasoned punters are likely to sign up for the casino annual passes which cost S$2000 as opposed to S$100 fees on a per entry basis.

· Genting’s share price is expected to be buoyed by the potential opening of RWS as the first Singapore IR. Keeping our earnings forecast as we reaffirm our BUY recommendation on Genting with unchanged target price of RM6.68. Though the opening of RWS is more likely to benefit Genting’s share price, we opine that investors should not ignore Genting Malaysia (formerly Resorts) which is eyeing for M&A opportunities in distressed casino assets given its huge warchest of RM4.85b. Reiterate BUY on Genting Malaysia with target price of RM3.50.

Tuesday 7 July 2009

Market Review for KLCI, S&P and Hang Seng 06/07/2009


I have not written for the last few weeks because I still could not determine which is market next direction would be. I was not certain whether the correction for KLCI down to 1030 points recently was it, or we should be seeing another round of correction. True, after KLCI’s channel was broken, we saw strong correction across the board but in some way market came back. At that point I knew that if KLCI surge beyond 1095 previous, i.e. the previous high then my view that our market would at least see strong correction then my view would be wrong. But it did not and for now, I would say that market has not decided yet.

The key indicator to our market direction is yet again, foreign market. I believe many of you would notice the textbook Head & Shoulder formation on S&P 500, and DJIA. Of course, that formation has not been broken yet. S&P 500 closed at 896 points while DJIA closed at 8280 points. Interestingly, the trigger point for S&P 500 & DJIA is 890 points 8250 points respectively, which means that these indices were standing at their support level last Thursday. Should it be broken, the next downside is 830 points for S&P 500 and 7500 points for DJIA.


S&P 500


Source: Nextview

Hang Seng still exudes confidence among investors, and standing pretty above 18000 points. It will only be negative once it closes below 17500 points. If we want to see other potential leading indicators, it would be on Commodities & Currencies.


Hang Seng



Source: Nextview

Crude Oil has broken its Double Top formation and should only find strong support at $55, while Gold seems to be well on the way to $870. The potentially damaging factor would be the countries throughout the world reduce their exposure on US Dollar. Recently China & Russia had called for reduced dependency and India has join in the bandwagon.

Now, I am all for reducing the dependency on US Dollar as your reserve, simply because it is not good to rely too much on them. Unfortunately, the world economy system had already been so used to having US Dollar as a reserve currency. Once that reliability is taken out, it would be chaotic, at least for a while. It is like us human trying to quit their addiction, whatever that may be. After all, economy is between human and it will exhibit human symptoms.

That is my take on the potential catalyst that might push world markets lower. As always, it could be anything. As mentioned before this, my immediate view would be more on where is the world market heading AFTER the correction, as I was pretty sure (90% certain) that market would go into corrective mode. If my calculation is correct, then we should still see KLCI correcting down to 970-1000 points. As a comparison since KLCI only has 30 stocks, FBMEMAS is trading around 7100-7200 points. Downside is at 6400 points. That is around 10-11% correction from current level. It would be much easier to forecast market's direction AFTER THE CORRECTION.

Monday 6 July 2009

KL Composite Index – Consolidation still



· Our local benchmark starts anew with 30 new component stocks. Technically, CI remains to be caught in a consolidation mode with neither side willing to give in at the current juncture. Regional markets also provided little cue with most consolidating after having undergone a good run-up for the past three months or so.

· Looking at the weekly, CI is again gingerly above the uptrend line with support at the 1,055 – 1,060 levels. Weekly RSI we noticed is seemingly rolling over, lending some negative bias in the near to medium term. Resistance meanwhile can be expected at the 1,091 – 1,097 levels.

· Our strategy remains unchanged which is to sell into any rallies as we believe the risk / reward is becoming increasingly tilted towards the former as market moves higher. Harsh reality that the global economic slowdown still has legs could finally dawn upon investors thereby providing the necessary downside risk in the near to medium term.

FCPO Daily 7/7/2009


8.30 : Weak external factors continues. SO and CO are trading 15 and 2% lower. FCPO Sep09 is seen stuck at the lower ranges again, within 2100-2150, a danger of a fresh breakdown looming.


Resistance- Support
2200-2150
2230-2120
2250-2100
2275-2070

last week.....FCPO revisited 2100 for the first time since xxx as prices retest major support level in a week that saw a weaker commodity market as players took a cautious stance on global economy recovery story. For the week, FCPO//CO/SO lost 6%/6%/4% respectively.

Market remains technically negative-bias and possibly shifting lower to a new trading range of 2000-2100 this week. FCPO Sep09 strong bounce from 2100 lows on Friday was nothing more than a weekend short covering as losses were deemed excessive. Unless external factors improve, FCPO will continue to trap inside a downtrend channel. Another breach of 2100 would bring about a new leg down towards 2000. The best case for bulls this week is to see the market consolidates within the horizontal support lines. Sentiment will turn neutral if Sep09 recovers back above 2200.

FKLI Daily Commentary - July 6, 2009

KL index futures buckled into the first hour of trading in tandem with losses across Asia markets as a weaker-than-expected US jobs report signaled more pain ahead for the world’s largest economy. Similarly, the local bourse started off in the red zone but steadily took a change for the better on bargain-hunting buying momentum. Despite the worrying development and an external front that remains volatile, futures exhibited resilience to the downside and traded on mild upward bias in positive zone for most part of trading sessions last Friday. Week-on-week, spot month contract declined 5 points to settle at 1074.

Given that Wall Street has been stuck in a range since May, KL market may just extend its present sideways pattern for this week. If there is any catalyst in the horizon, it may well be the start of 2nd quarter earnings season in US to sway market sentiment. For today, July contract initial support is seen at 1065. To the upside, resistance can be expected at 1081.

Sunday 5 July 2009

Kenanga Today 6th JULY


COMPANY UPDATE

· Alliance Financial Group (BUY; RM2.34; TP: RM2.70) – Navigating To Win



SECTOR UPDATE

· Water Sector: PAAB to announce the status by today



NEWS HIGHLIGHTS

· KLK (Trading SELL; TP: RM11.10) restructure Crabtree & Evelyn in US

· IOI (Trading SELL; TP: RM4.60) says worst is over for plantations

· AirAsia launches daily KK to Brunei flights

· Foreign interest in AirAsia rises to 38pc

· Public Bank launches PB Templeton Global Asian Focus

· US fund buys 13.5m Media Prima shares



ECONOMIC NEWS HIGHLIGHTS

· Bank Negara sees solid, long-term dollar role

· Malaysia draws RM4.2b FDI in Jan-May



FOREIGN NEWS HIGHLIGHTS

· US stocks slide on weak job data

· U.S. Economy: Job cuts in June deeper than forecast

· Private equity slams proposed banking rules

China lets foreign banks access yuan for HK trade

Saturday 4 July 2009

Puncak Niaga Holdings


Puncak Niaga Holdings- Revised RM5.3b offer still not impressive (Company Update)

Price: RM3.30
Target Price: RM3.86
Recommendation: BUY

· The RM5.3b offer includes RM4.1b debt and RM1.2b equity. The offer has improved by an additional RM2.2b to the previous offer of RM3.1b in February 2009. The offer comprises of RM1.9b and RM3.3b for PNSB and Syabas, respectively. Puncak is given the option either to retain the debts or be assumed by the SSG. The equity value of RM1.2b translates to RM2.73 sen per share (100% and 70% stake in PNSB and Syabas).

· Details of the offer are vague and inconsistent. After scrutinizing the offer details, there are few inconsistencies in the conditions of the sales and purchase vis-à-vis the offer to ABASS and SPLASH. The inconsistencies are, (1) the basis of financial year for the assets and liabilities (2) the condition to sale the assets to PAAB subsequently (3) the rationale of valuing the equity value, which is missing and not well interpreted in the offer letter. Thus, it creates presumption of the assets and liabilities to be held by SSG and not by PAAB, subsequent to the sale.

· Puncak is valued at RM3.53 assuming its FY08 audited book value and it is still not impressive. Assuming the offer is based on Puncak’s FY08 audited accounts via BV method; Puncak is valued at RM3.53 and largely ignores the future income of the concessions. We also understand that the offer includes the long term receivables to the state government amounting to RM405m arising from the sale of water to the state. Based on our analysis, the BV of its water assets (inclusive the long term receivables and its net debt) as at FY08A could reach up to RM4.47 sen per share which is higher than the state’s offer for equity value of RM2.73.

· It is worth to refute the offer hence paving ways for PAAB to take the lead. Despite the slightly higher offer price, we think that it is worth it for Puncak to turn down the offer as it is still not attractive and the price is deemed low. The next move, we expect that SSG will request for time extension from the federal government whilst PAAB is likely to take the lead since SSG has been given two separate datelines to wrap up the consolidation.

· Reiterating our BUY call with unchanged target price of 3.86. Our target price is pegged at 20% to our full DCF valuation of RM4.82.

FBM KLCI ....countdown 3/3.... KLCI sayonara


This is the last "very-short" write-up series ahead of FBM KLCI launching on Monday, 6th July 2009.

i) FBM KLCI stocks' elect as measured by PE(x) ratio. - "the level of market confidence on the stock" (see attached for others stock market ratio, yes plenty of numbers!)


p/s please take note that stock market ratio like, PE ratio, is best compared to its peers in the same industry.

ii) FBM KLCI ...other highlights and trivial

1) Large concentration of financial and plantation related stocks, almost 55% of market total weightage. Besides banking performance, CPO trend or even crude oil, due to its recent strong positive correlation with CPO, will have a greater influence in deciding the index’s direction.

2) Now you can buy “a stock” via ETF to match the FBM KLCI performance. The current FBM30etf will track FBM KLCI when it is launched. If you are a fan of "bluechips" stock, you can buy a basket of their shares via FBM30etf and hedge your position via FKLI when, and if, the market trends lower.

3) FKLI final settlement value calculation for July09 contracts and onwards will be based on FBM KLCI. FSV calculation is : FBM KLCI data taken from 3:45:15 pm to 4:45:00 pm plus the closing data at 5 pm. It is a simple average of the total 235 values (after taken out 3 highest and 3 lowest values).

4) FBM KLCI will broadcast its index value every 15 seconds vs.. KLCI's every 1 minute. So, there will be less slippage during the day but a big move in the preclosing phase can still happen.

Friday 3 July 2009

Water Sector - PAAB to announce the status by today



· Selangor says negotiations are ongoing whilst PAAB will announce the status by today… According to the Selangor’s chief minister in the recent press release the state government was still in negotiation with the remaining 3 concessionaires (PNSB, Syabas and Splash). The negotiation is to address the management of the water treatment plants after the take over. This news came in as a surprise as we think that the consolidation process could be further delayed. On the other side, the federal government will announce the status of the consolidation plan by today as we expect the federal government via Pengurusan Asset Air Berhad (PAAB) to intervene the consolidation of the assets.

· There is improvement in the revised offer but still not impressive as the O&M license issues not properly addressed. It is undeniable that the revised offer was much better with the offer price increasing to RM9.2b from RM5.7b. The improvement includes the SSG take over of the liabilities and the doubling of equity value to RM2.9b. Nevertheless, the offer missed out the essence of the whole consolidation story which is the post-consolidation structure i.e the O&M license. At this juncture, we think that the federal government is in a best position to award the O&M licenses hence making the offer more attractive.

· What is the “right price”? Presumably higher price? Tan Sri Rozali, the CEO of Puncak quoted that Puncak will consider the sale of its water assets if the offer price is right. Quoting the details from the news before the announcement of the revised offer, Puncak might be looking at a higher price suggesting more than RM6.00 if they opted to exit and to surrender the assets to SSG. Having said that, the implication of the sale of assets is at a higher price, Puncak is probably looking to exit the industry which we think is unlikely to happen.

· Puncak is valued at RM3.53 assuming the recent take over price is at 2008 book value. We understand the offer price from SSG includes the long-term receivables (related water assets) from the SSG amounted to RM405m. This leaves the equity value for its related water assets at RM2.73. By implying the remaining net asset value, Puncak is worth RM3.53 which is higher than its FY08 book value of RM3.30.

Thursday 2 July 2009

STOCK FOCUS OF THE DAY


Berjaya Sports Toto : Dividends, a sure bet BUY

We are maintaining our BUY rating on Berjaya Sports Toto (BToto) with a higher DCF-based fair value RM5.55/share, from RM5.35/share previously, to account for an expected earnings uplift coming from the imminent introduction of its “Power Toto 6/55” lottery game. We have raised our earnings estimates for FY10F-12F by 1%-5% on the back of stronger betting sales growth assumptions, underpinned by incremental sales from the Power Toto 6/55 lottery game where the jackpot starts from RM3mil, as opposed to RM300,000 previously for its 6/42 game. “Snowballing” effect on sales is expected to be more significant. In our opinion, BToto should remain a core holding. Its structural advantages and attractive business model are well-known. And we continue to expect BToto to outpace the industry’s betting sales growth, having grown by +13% in FY09 against 7% for the industry. In addition, BToto may further “optimise” its games by revamping its less popular digit games - 5-D and 6-D, and the 6/49 lottery game - to maximise betting sales growth. For FY10F, we forecast betting sales to expand by 7%, and 9% in FY11F, with stable payout ratios of 65%-66% (FY09: 64%). As it is, the stock is already offering an attractive yield of 13% (RM0.66/share) based on its current share price of RM5.10/share. This comprises a final dividend of RM0.11/share for 4QFY09, a forward dividend of RM0.19/share for 1QFY10 and also, the distribution of Treasury shares on a ratio of 1:14.

Others :
Cosco Corporation : Weathering through order cuts and deferrals BUY

QUICK TAKES
Bumi-Commerce Hldgs : Pushing ahead with “bad bank” plans BUY
AirAsia : Roadshow to gauge investor interest SELL
Sembcorp Marine Ltd : Secured second SeaDragon deal BUY

NEWS HIGHLIGHTS
SP Setia : Plans RM5bil Kuala Lumpur project
Axiata Group : Plans to borrow about RM1bil of Islamic loans
Malaysian Airline System : Malaysian Airlines keeping A380 orders, does not plan capacity cuts
WCT : WCT says targeting RM1bil of new orders this year

AmFraser Research
SMRT Corp Ltd : Defensive earnings amid slow economy BUY

Wednesday 1 July 2009

Kenanga Today





RESULTS NOTES

· Adventa (BUY; RM1.14; TP: RM1.48) - Worst over

· VS Industry (HOLD; RM1.27; TP: RM1.13) - Bottoming



NEWS HIGHLIGHTS

· Scapped — 30% bumi equity rule

· New department to replace Foreign Investment Committee

· Maybank sees slight deterioration in NPLs

· Maybank may boost BII asset size

· KLCCP sees lettable commercial space to double in 5-10 yrs

· Ingress units bag RM61.9m Tenaga jobs

· F&N gets extension of Coca-Cola bottling business until Sept 30, 2011

· Kulim secures RM430m loan

· Bursa rejects Wimems appeal

· AirAsia placement to raise RM500mil

· Property transactions no longer need FIC approval

· Bursa plans to raise free-float: Chief

· TM plans to sell KL property



FOREIGN NEWS HIGHLIGHTS

· Wall St brakes on confidence data, but has upbeat Q2

· Gloomy U.S. consumers clip housing recovery hopes

Japan’s Tankan confidence rebounds from record low

Adventa -Worst over

Price: RM1.14
Target Price: RM1.48
Recommendation: BUY

· 2Q09 results were mainly within expectations. 6M09 revenue of RM135.4m came in at 47.4% of our expectations while net at RM7m was only 40.6%. The slight underperformance at the net was mainly due to forex hedging losses which amounted to RM8.6m for the 6M09 without which the numbers would have far exceeded our initial forecast.

· QoQ, revenue was flat with 2Q09 revenue down 1.3%. With capacity utilization of its 2.2b Malaysian capacity very much maxed out in the near term, the group was therefore unable to capitalize immensely from the recent surge in demand as a result of the flu pandemic. GP margins however moved up 12 basis points to 23.4% as a result of lower input prices and continuous cost containment exercises.

· YoY, revenue was up 11.8% but net was down 35.9% mainly as a result of the RM8.6m in hedging losses. Normalised, bottomline could have improved by a substantial 42% on the back of a near 12% improvement in topline performance.

· Worst had been seen. Management is confident that the worst is behind with the currency hedge likely to have run its course by the end of FY09. While there remains to have some lingering impact still for the next two quarters, the impact at the absolute is likely to be much lesser compare to the first 6 months of the year.

· Demand remains robust with new products gaining traction across the globe. As a result, management is earmarking another new expansion in Kluang with another 2.5 billion pieces (83% increase) capacity dedicated to producing synthetic medical gloves. Capital expenditure of RM15m – RM20m had been budgeted with capacity likely to come on line by the 2nd quarter 2010.

· Forecast is lowered but target price is raised to RM1.48. We are lowering our FY09 net profit by 10% taking into account a higher than expected hedging losses. We are also lowering our FY10 numbers by 7.9% as we factor in higher interest expenses which we had been conservative previously. As we introduce our FY11 numbers and roll over valuation to CY10, a new target price of RM1.48 is derived based on 8x earnings. BUY maintained.

How did the FBM KLCI stocks' elect perfom in 1H09 ?



FBM KLCI stocks' elect last price in relation to 52-week high and low.

OSK-T28 Call Warrants

OSK is offering 4 new Call Warrants (Maturity: 9 months) today and enclosed please find the Company Info for T- 28 .

Underlying------------ Stock Code------------- Exchange
SPDR® GOLD TRUST------- GLD------------------- NYSE
U.S OIL FUND ETF------- USO------------------- KLSE
CNOOC------------------ 883------------------- HSI
PBBANK----------------- 4715------------------ KLSE

Subscribers must be aware of the following:

CAUTIONS:
Subscribers bear the risk of falling markets prior to the listing of the call warrants.

Call warrant is basically a bullish instrument, which is of high risk and high returns.

Pricing variables - An adverse movement in any of a warrant’s pricing variables (underlying price, time-to-expiry, volatility, interest rate and share dividends) can have negative impact on warrant price.

Gearing risk - Effective gearing, the primary attraction of warrants, can be double-edged sword. Warrants will appreciate and depreciate in value more rapidly than underlying securities.

Limited life - Unlike stocks (underlying securities), warrants have an expiry date and therefore a limited life. Unless the warrants are “in-the-money” (underlying price is above the exercise price of the call warrant or below the exercise price for a put warrant upon expiry), the warrant will be worthless at expiry.


Time decay - Investors must be aware that other factors that being equal; the value of the warrants will decrease over time. Therefore, they should never be viewed as products that are bought and held as long term investment.

AIG reverse stock split 1-for- 20 (qty down 20x & price adjust up 20x) ex-1/7/09

SAN FRANCISCO (MarketWatch) -- American International Group Chief Executive Edward Liddy said Tuesday that he's been given no assurances that the government's 78.9% stake in the troubled insurance giant will ever change.

Liddy was responding to a shareholder who suggested during the company's annual meeting that a lower government stake could increase the value of the business. As AIG makes progress in its overall re-organization, a lower government stake might be discussed, Liddy added.

AIG /quotes/comstock/13*!aig/quotes/nls/aig (AIG 1.16, -0.17, -12.78%) is more stable than it was a few months ago, Liddy said earlier in the meeting.
Shareholders defeated a proposal to increase the number of AIG common shares, according to an early count at the meeting.

The insurer had proposed to increase the number of authorized shares of common stock from 5,000,000,000 to 9,225,000,000. The extra stock would have been helpful to AIG if the company decided to defer interest payments on junior subordinated debentures. It would also have helped AIG raise capital or swap debt for equity.

All other proposals passed and all AIG directors were elected. The insurer is planning a reverse stock split which is scheduled to take effect later on Tuesday.
AIG shares fell 13% to close at $1.16 on Tuesday.

AIG nearly collapsed last year under the weight of derivative-based guarantees on mortgage-related securities that the insurer sold during the credit boom earlier this decade. The government bailed the company out with more than $80 billion of taxpayer money and now owns 78.9% of the business.

AIG is trying to sell many of its businesses to repay government loans and become independent again. But the recession is making it difficult to sell units at good prices and the sheer extent of the government's involvement in the company remains daunting.

AIG is planning to sell some of American International Assurance Co., its Asian life insurance business, in a Hong Kong initial public offering next year.
AIG is also planning a 2010 IPO of American Life Insurance Company, or Alico, another large subsidiary that offers wealth management, retirement planning, life and health insurance outside the U.S. in 55 countries.

AIG put AIA and Alico in special purpose vehicles last week and gave the Federal Reserve Bank of New York preferred shares in the businesses worth $25 billion. That cut debt AIG owed the New York Fed to roughly $15 billion from $40 billion.
On Tuesday, AIG said it sold a credit card business in Taiwan. That follows several other sales, including most of its stake in reinsurer Transatlantic Holdings /quotes/comstock/13*!trh/quotes/nls/trh (TRH 43.33, +0.44, +1.03%) .
AIG is still deciding what to do with its large aircraft leasing business, ILFC, Liddy said on Tuesday. The unit has a lot of debt and leverage is viewed dimly by investors in the current environment, he explained.

Late Monday, AIG warned about credit derivative contracts it wrote for mainly European financial institutions that had a net notional value of $192.6 billion at the end of March.

Most of these contracts were written to help institutions hold less capital to support corporate loans and residential mortgage deals, AIG explained in a regulatory filing.

Regulatory changes mean most counterparties will likely terminate the contracts within the next 12 months. AIG Financial Products, the insurer's troubled derivatives unit, probably won't have to make any payments on the contracts, AIG said.

However, AIG also warned that it couldn't rule out reporting unrealized losses if the market value of the portfolio shifts.

"Given the size of the credit exposure, a decline in fair value of this portfolio could have a material adverse effect on AIG's consolidated results of operations or consolidated financial condition," the insurer said.

Initial Public Offering (IPO)

Initial Public Offering (IPO)
Reference No JM-090629-33087

Company Name:HANDAL RESOURCES BERHAD
Stock Name :N/A
Date Announced:29/06/2009




Subject:PUBLIC ISSUE OF 18,500,000 NEW ORDINARY SHARES OF RM0.50 EACH IN HANDAL RESOURCES BERHAD AT AN ISSUE PRICE OF RM0.72 PER SHARE PAYABLE IN FULL UPON APPLICATION COMPRISING:-

• 6,000,000 NEW ORDINARY SHARES OF RM0.50 EACH AVAILABLE FOR APPLICATION BY THE MALAYSIAN PUBLIC;

• 4,000,000 NEW ORDINARY SHARES OF RM0.50 EACH AVAILABLE FOR APPLICATION BY OUR ELIGIBLE DIRECTORS, EMPLOYEES AND PERSONS WHO HAVE CONTRIBUTED TO THE SUCCESS OF OUR GROUP;

• 8,500,000 NEW ORDINARY SHARES OF RM0.50 EACH BY WAY OF PRIVATE PLACEMENT TO IDENTIFIED INVESTORS; AND

OFFER FOR SALE OF 6,000,000 ORDINARY SHARES OF RM0.50 EACH IN HANDAL RESOURCES BERHAD AT AN OFFER PRICE OF RM0.72 PER SHARE PAYABLE IN FULL UPON APPLICATION TO IDENTIFIED INVESTORS

IN CONJUNCTION WITH THE LISTING OF AND QUOTATION FOR THE ENTIRE ENLARGED ISSUED AND PAID-UP ORDINARY SHARE CAPITAL OF HANDAL RESOURCES BERHAD ON THE SECOND BOARD OF BURSA MALAYSIA SECURITIES BERHAD