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.