Published November 28, 2008
Petra settles suit with Die Hard star
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(LOS ANGELES) A Malaysian technology conglomerate has repaid US$900,000 to Bruce Willis after the actor filed a lawsuit demanding a refund of his investment.
Martin Singer, Willis's lawyer, says that the federal lawsuit filed in Los Angeles has been 'amicably resolved'. The Kuala Lumpur-based Petra Group said that Willis invested US$2 million last year in its subsidiary, Green Rubber, a developer of technology that can recycle rubber in old tires.
Petra returned US$1.1 million to the star of the Die Hard action films earlier this year when he decided to pull out his investment. Willis sued last week to get the remaining US$900,000, plus interest and other compensation.
Mr Singer says that the initial investment has been repaid, but Willis was not given all the interest owed him. The actor remains a shareholder in the company. Petra quoted Willis as saying in the statement: 'Having resolved the matter, I will continue to maintain a shareholding position in the company and I wish the company, the directors and my fellow shareholders the very best for the future. I continue to believe in the green rubber technology and the vast potential it holds for the environment.'
When news of the lawsuit broke last week, Petra Group spokesman Andrew Murray-Watson said that last year, Willis contacted Petra's chief executive Vinod Sekhar asking to invest in Green Rubber, which uses an environmentally friendly technology to recycle tyres. Mr Sekhar had agreed to buy back Willis's shares at any time he wanted to sell.
At the time, Green Rubber was planning to list on the London stock market, but because of the global credit crunch the plans had to be put on hold - triggering the disagreement between the two sides, he said. - AP, AFP, Bloomberg
Friday, 28 November 2008
Published November 28, 2008
Manipal's unit to invest RM20m in facility
By PAULINE NG
IN KUALA LUMPUR
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STEMPEUTICS Research - a fully owned subsidiary of India's Manipal Group - plans to invest RM20 million (S$8.35 million) in a stem cell research facility in Malaysia with the aim of introducing a stem cell based product in three years.
Over the past three years, the education and healthcare group had been conducting pilot studies in India on stem cell use in the areas of heart attacks and vascular diseases, and intends to begin clinical trials soon.
Stempeutics has two labs in India and its third in Malaysia has as its goal the development of cell-based therapeutics using human adult stem cells derived from bone marrow.
The potential for stem cell research and therapy in Malaysia is estimated at US$157 million, and growing annually at some 12 per cent, according to Malaysian Biotechnology Corporation, the government agency established to develop biotechnology and attract investment capital into the sector.
Last year, it awarded Stempeutics BioNexus status - the first international company in cell stems research and therapeutics to be given the status. This status accords it a range of tax incentives and 'rights', such as the ability to fully own the local set-up.
Formed only in 2005, BiotechCorp has since awarded 80 companies BioNexus status and approved a total of RM1.3 billion in investments - mainly in the three focus areas of healthcare, agriculture, and industrial biotech.
Still at a nascent stage, the biotech sector currently employs some 1,600 knowledge workers, most of whom are locals.
Because of its headstart in the sector, India is one of the countries targeted.
The Manipal group already has substantial business interests in the country and establishing a Stempeutics lab in Malaysia is a logical choice.
'Our aim is to make Malaysia the stem cell hub for this part of the world,' Stempeutics Research president BN Manohar said at the launch of the facility in Technology Park Malaysia yesterday.
He outlined the company's main goals: introducing a medicine based on stem cells and a cell-based platform for the testing of drugs by other entities; plus the development of local human capital.
Manipal's unit to invest RM20m in facility
By PAULINE NG
IN KUALA LUMPUR
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STEMPEUTICS Research - a fully owned subsidiary of India's Manipal Group - plans to invest RM20 million (S$8.35 million) in a stem cell research facility in Malaysia with the aim of introducing a stem cell based product in three years.
Over the past three years, the education and healthcare group had been conducting pilot studies in India on stem cell use in the areas of heart attacks and vascular diseases, and intends to begin clinical trials soon.
Stempeutics has two labs in India and its third in Malaysia has as its goal the development of cell-based therapeutics using human adult stem cells derived from bone marrow.
The potential for stem cell research and therapy in Malaysia is estimated at US$157 million, and growing annually at some 12 per cent, according to Malaysian Biotechnology Corporation, the government agency established to develop biotechnology and attract investment capital into the sector.
Last year, it awarded Stempeutics BioNexus status - the first international company in cell stems research and therapeutics to be given the status. This status accords it a range of tax incentives and 'rights', such as the ability to fully own the local set-up.
Formed only in 2005, BiotechCorp has since awarded 80 companies BioNexus status and approved a total of RM1.3 billion in investments - mainly in the three focus areas of healthcare, agriculture, and industrial biotech.
Still at a nascent stage, the biotech sector currently employs some 1,600 knowledge workers, most of whom are locals.
Because of its headstart in the sector, India is one of the countries targeted.
The Manipal group already has substantial business interests in the country and establishing a Stempeutics lab in Malaysia is a logical choice.
'Our aim is to make Malaysia the stem cell hub for this part of the world,' Stempeutics Research president BN Manohar said at the launch of the facility in Technology Park Malaysia yesterday.
He outlined the company's main goals: introducing a medicine based on stem cells and a cell-based platform for the testing of drugs by other entities; plus the development of local human capital.
Published November 28, 2008
Resurgent assertiveness of M'sian sultans picking up pace
By S JAYASANKARAN
IN KUALA LUMPUR
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MALAYSIA'S royals have begun asserting themselves in ways that would have been unthinkable just eight months ago.
Over successive days this week, the ceremonial rulers of Perak, Selangor and Negri Sembilan have criticised a fatwa - or Islamic ruling - by the National Fatwa Council that banned the practice of yoga by Muslims. The council had ruled that yoga contained elements of Hinduism that could lead Muslims astray.
Only a month previously, there had been another fatwa outlawing 'tomboys' among Muslims - how that would be defined is still anyone's guess.
The royals asserted that guidelines involving Islam should have been brought before the Rulers' Conference and endorsed before being announced.
Malaysia's sultans are the heads of religion in their respective states but fatwas have rarely, if ever, been brought to their attention. Now, it appears that they might be although the council has yet to say so.
The resurgent assertiveness among the country's royals marks an increasing trend first witnessed after the March 8 general election, at which the ruling National Front and its dominant party the United Malays National Organisation, or Umno, fared dismally.
Shortly after the election, Prime Minister Abdullah Ahmad Badawi failed to push his choice of chief minister in both the states of Perlis and Terengganu after their monarchs rejected his candidates and suggested others instead.
In both instances, which happened in quick succession, Mr Abdullah backed off and obeyed their wishes. Such a response was also unprecedented and would have been unthinkable during the tenure of former premier Mahathir Mohamad.
Since then, the royals have had considerable influence in shaping the opposition state governments of Selangor and Perak, and have commented on a wide range of issues, from Malay unity to race relations - something that they would not have done previously.
Malaysia has a unique system of constitutional monarchy whereby nine out of 13 states have royal houses, whose heads take turns every five years to become the Yang Dipertuan Agong, or King. By and large, however, the royals are much respected by Malaysians who see them as the final check against executive abuse of power.
It was Dr Mahathir who went the furthest in stripping the royals of their already constitutionally circumscribed power. In 1983, he attempted to push through constitutional amendments that curbed the power of royalty to veto parliamentary bills.
But that was a hard fought battle because the royals did not take it lightly and, in the end, Dr Mahathir worked out a compromise that gave the monarchs some room to manoeuvre.
In 1992, Dr Mahathir went for the jugular after a royal from Johor state was reported to have assaulted a hockey coach. The local press were given information about royal indiscretions - both personal and financial - and assailed the royal houses mercilessly until they agreed to new constitutional amendments that stripped their immunity in both civil and criminal matters.
The royals could be looking to go back into the future. Speaking at a seminar on the monarchy on Wednesday, Tengku Naquiyuddin Tengku Jaafar urged the authorities to restore immunity for the royals, describing its removal as the biggest blow inflicted on the institution.
'Bring back the immunity, debate it and define it,' Negri Sembilan's regent told the audience. 'Let us be on a par with other constitutional monarchies.'
Resurgent assertiveness of M'sian sultans picking up pace
By S JAYASANKARAN
IN KUALA LUMPUR
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MALAYSIA'S royals have begun asserting themselves in ways that would have been unthinkable just eight months ago.
Over successive days this week, the ceremonial rulers of Perak, Selangor and Negri Sembilan have criticised a fatwa - or Islamic ruling - by the National Fatwa Council that banned the practice of yoga by Muslims. The council had ruled that yoga contained elements of Hinduism that could lead Muslims astray.
Only a month previously, there had been another fatwa outlawing 'tomboys' among Muslims - how that would be defined is still anyone's guess.
The royals asserted that guidelines involving Islam should have been brought before the Rulers' Conference and endorsed before being announced.
Malaysia's sultans are the heads of religion in their respective states but fatwas have rarely, if ever, been brought to their attention. Now, it appears that they might be although the council has yet to say so.
The resurgent assertiveness among the country's royals marks an increasing trend first witnessed after the March 8 general election, at which the ruling National Front and its dominant party the United Malays National Organisation, or Umno, fared dismally.
Shortly after the election, Prime Minister Abdullah Ahmad Badawi failed to push his choice of chief minister in both the states of Perlis and Terengganu after their monarchs rejected his candidates and suggested others instead.
In both instances, which happened in quick succession, Mr Abdullah backed off and obeyed their wishes. Such a response was also unprecedented and would have been unthinkable during the tenure of former premier Mahathir Mohamad.
Since then, the royals have had considerable influence in shaping the opposition state governments of Selangor and Perak, and have commented on a wide range of issues, from Malay unity to race relations - something that they would not have done previously.
Malaysia has a unique system of constitutional monarchy whereby nine out of 13 states have royal houses, whose heads take turns every five years to become the Yang Dipertuan Agong, or King. By and large, however, the royals are much respected by Malaysians who see them as the final check against executive abuse of power.
It was Dr Mahathir who went the furthest in stripping the royals of their already constitutionally circumscribed power. In 1983, he attempted to push through constitutional amendments that curbed the power of royalty to veto parliamentary bills.
But that was a hard fought battle because the royals did not take it lightly and, in the end, Dr Mahathir worked out a compromise that gave the monarchs some room to manoeuvre.
In 1992, Dr Mahathir went for the jugular after a royal from Johor state was reported to have assaulted a hockey coach. The local press were given information about royal indiscretions - both personal and financial - and assailed the royal houses mercilessly until they agreed to new constitutional amendments that stripped their immunity in both civil and criminal matters.
The royals could be looking to go back into the future. Speaking at a seminar on the monarchy on Wednesday, Tengku Naquiyuddin Tengku Jaafar urged the authorities to restore immunity for the royals, describing its removal as the biggest blow inflicted on the institution.
'Bring back the immunity, debate it and define it,' Negri Sembilan's regent told the audience. 'Let us be on a par with other constitutional monarchies.'
Published November 28, 2008
With RM11b in hand, YTL eyes cheap assets
The firm generates excitement due to its growth despite the financial turmoil
By S JAYASANKARAN
IN KUALA LUMPUR
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IF you had invested RM10,000 (S$4,180) in YTL Corporation 23 years ago and held on, you would have over RM700,000 by now.
Mr Yeoh: His growth strategy is to acquire assets overseas using profits earned in Malaysia
That's why the firm still generates excitement.
In April last year Lucius Chong, an analyst with JPMorgan, paid his first visit to the Malaysian infrastructure and utilities company and came away sufficiently impressed to forecast a price target of RM9.20 for the stock when it was trading at around RM7.
He is still sticking to his guns predicting that the firm should reach RM8.80 now despite a looming slowdown amid unprecedented global financial turmoil.
YTL Corp, 52 per cent owned by the family of businessman Yeoh Tiong Lay, is an enormous holding company with a market capitalisation of RM9.7 billion, and its six separate listed entities are involved in everything from construction, telecommunications and cement manufacturing to power generation and property.
Francis Yeoh Sock Ping, 54, a smooth-talking opera buff and the eldest son of the patriarch Yeoh, runs the company now and frequently talks about the firm's cash hoard of RM11 billion that he can use to buy assets on the cheap.
Strictly speaking, the firm is in a net debt position to the tune of almost RM11 billion, but JPMorgan's Mr Chong points out that much of the debt is ring-fenced on a project-by-project basis and without recourse to the holding company.
So, Mr Yeoh is right about using the cash most of which lies with 53 per cent-owned YTL Power which contributes more than 70 per cent of the conglomerate's profits.
Mr Yeoh's growth strategy is overseas acquisition - power distribution in Australia, a water utility in Britain, a real estate investment trust in Singapore - using profits made in Malaysia to rebrand YTL as a global infrastructure company. In many ways people like Mr Yeoh epitomise an expanding group of Malaysian businessmen that has come of age. Long overshadowed by foreign multinationals, local companies now have the capability and the financial heft to outbid their bigger foreign brethren for assets up for grabs anywhere in the world.
In YTL Corp's case, some of those opportunities came courtesy of Enron's collapse in the United States and the retreat of American power companies from overseas investments. YTL Corp's RM6.89 billion acquisition of Britain's Wessex Water in 2002, for example, came about after Enron put Wessex up for sale. Now the global financial crisis has made assets worldwide cheap and Mr Yeoh has openly said that he is on the lookout.
Mr Yeoh's critics attributed his success to his connections, particularly his closeness to former premier Mahathir Mohamad. But to tie Mr Yeoh's rise too closely to political patronage would be inaccurate. Although he made his money from a key break in 1992, Mr Yeoh hasn't frittered away his company's money on grandiose schemes. And unlike other Malaysian businessmen handed similar breaks, he hasn't overreached himself either.
Indeed, he has created shareholder value: over the last 15 years, YTL has delivered around 30 per cent in compounded growth in earnings per share.
Power generation through Malaysia's first independent power producer vaulted YTL into the big leagues. For the year ended June 30, 2008, YTL Corp made a core net profit of RM848 million on revenues of RM7.8 billion.
This compares with RM44 million in net earnings in 1994 before contributions from power operations began flowing.
With RM11b in hand, YTL eyes cheap assets
The firm generates excitement due to its growth despite the financial turmoil
By S JAYASANKARAN
IN KUALA LUMPUR
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IF you had invested RM10,000 (S$4,180) in YTL Corporation 23 years ago and held on, you would have over RM700,000 by now.
Mr Yeoh: His growth strategy is to acquire assets overseas using profits earned in Malaysia
That's why the firm still generates excitement.
In April last year Lucius Chong, an analyst with JPMorgan, paid his first visit to the Malaysian infrastructure and utilities company and came away sufficiently impressed to forecast a price target of RM9.20 for the stock when it was trading at around RM7.
He is still sticking to his guns predicting that the firm should reach RM8.80 now despite a looming slowdown amid unprecedented global financial turmoil.
YTL Corp, 52 per cent owned by the family of businessman Yeoh Tiong Lay, is an enormous holding company with a market capitalisation of RM9.7 billion, and its six separate listed entities are involved in everything from construction, telecommunications and cement manufacturing to power generation and property.
Francis Yeoh Sock Ping, 54, a smooth-talking opera buff and the eldest son of the patriarch Yeoh, runs the company now and frequently talks about the firm's cash hoard of RM11 billion that he can use to buy assets on the cheap.
Strictly speaking, the firm is in a net debt position to the tune of almost RM11 billion, but JPMorgan's Mr Chong points out that much of the debt is ring-fenced on a project-by-project basis and without recourse to the holding company.
So, Mr Yeoh is right about using the cash most of which lies with 53 per cent-owned YTL Power which contributes more than 70 per cent of the conglomerate's profits.
Mr Yeoh's growth strategy is overseas acquisition - power distribution in Australia, a water utility in Britain, a real estate investment trust in Singapore - using profits made in Malaysia to rebrand YTL as a global infrastructure company. In many ways people like Mr Yeoh epitomise an expanding group of Malaysian businessmen that has come of age. Long overshadowed by foreign multinationals, local companies now have the capability and the financial heft to outbid their bigger foreign brethren for assets up for grabs anywhere in the world.
In YTL Corp's case, some of those opportunities came courtesy of Enron's collapse in the United States and the retreat of American power companies from overseas investments. YTL Corp's RM6.89 billion acquisition of Britain's Wessex Water in 2002, for example, came about after Enron put Wessex up for sale. Now the global financial crisis has made assets worldwide cheap and Mr Yeoh has openly said that he is on the lookout.
Mr Yeoh's critics attributed his success to his connections, particularly his closeness to former premier Mahathir Mohamad. But to tie Mr Yeoh's rise too closely to political patronage would be inaccurate. Although he made his money from a key break in 1992, Mr Yeoh hasn't frittered away his company's money on grandiose schemes. And unlike other Malaysian businessmen handed similar breaks, he hasn't overreached himself either.
Indeed, he has created shareholder value: over the last 15 years, YTL has delivered around 30 per cent in compounded growth in earnings per share.
Power generation through Malaysia's first independent power producer vaulted YTL into the big leagues. For the year ended June 30, 2008, YTL Corp made a core net profit of RM848 million on revenues of RM7.8 billion.
This compares with RM44 million in net earnings in 1994 before contributions from power operations began flowing.
Published November 28, 2008
Hong Leong Asia makes bid for Tasek, valuing it at $290m
Offer triggered by move to buy 13.5% stake for $39.5m
By JAMIE LEE
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HONG Leong Asia (HLA) has made another attempt to acquire Tasek Corporation Berhad in an offer that values the Malaysian building material company at about $290 million.
HLA said yesterday that it has agreed to buy a 13.5 per cent stake in Tasek. This raised the 32.23 per cent holding held by HLA and persons acting in concert to 45.73 per cent, triggering a conditional takeover offer for the remaining 54.3 per cent stake that it does not already own at RM3.80 per share.
The offer is being made through HLA's wholly owned unit Hartwell Pte Ltd.
HLA agreed to buy the 13.5 per cent stake from Calamus Pte Ltd for about $39.5 million - which represents 24.9 million shares at RM3.80 each.
Calamus is a wholly owned unit of GK Goh Holdings, said GK Goh in a separate announcement yesterday.
CIMB-GK Securities Pte Ltd and CIMB Investment Bank Bhd are the financial advisers for the deal.
'HLA believes that Tasek has good potential in terms of its future growth given its established position as a manufacturer and distributor of cement and related products in Malaysia,' the company said yesterday.
The bid follows HLA's announcement earlier this week that the proposed sale of its building materials business to Tasek has been mutually called off over condition fulfilment issue.
Based on the earlier sales and purchase agreement, the transaction was to have been worth $288 million.
This is based on an issue of about 180 million new ordinary shares in Tasek to HLA at the issue price of RM3.54 apiece and a RM30 million cash payment to HLA.
Had the transaction been completed, HLA would have held a near 66 per cent stake of Tasek.
Tasek, which was last traded at RM3.50, was listed in 1964 on the Stock Exchange of Malaysia, now the Bursa Securities.
HLA said trading of its shares would be lifted today at 9am.
Hong Leong Asia makes bid for Tasek, valuing it at $290m
Offer triggered by move to buy 13.5% stake for $39.5m
By JAMIE LEE
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HONG Leong Asia (HLA) has made another attempt to acquire Tasek Corporation Berhad in an offer that values the Malaysian building material company at about $290 million.
HLA said yesterday that it has agreed to buy a 13.5 per cent stake in Tasek. This raised the 32.23 per cent holding held by HLA and persons acting in concert to 45.73 per cent, triggering a conditional takeover offer for the remaining 54.3 per cent stake that it does not already own at RM3.80 per share.
The offer is being made through HLA's wholly owned unit Hartwell Pte Ltd.
HLA agreed to buy the 13.5 per cent stake from Calamus Pte Ltd for about $39.5 million - which represents 24.9 million shares at RM3.80 each.
Calamus is a wholly owned unit of GK Goh Holdings, said GK Goh in a separate announcement yesterday.
CIMB-GK Securities Pte Ltd and CIMB Investment Bank Bhd are the financial advisers for the deal.
'HLA believes that Tasek has good potential in terms of its future growth given its established position as a manufacturer and distributor of cement and related products in Malaysia,' the company said yesterday.
The bid follows HLA's announcement earlier this week that the proposed sale of its building materials business to Tasek has been mutually called off over condition fulfilment issue.
Based on the earlier sales and purchase agreement, the transaction was to have been worth $288 million.
This is based on an issue of about 180 million new ordinary shares in Tasek to HLA at the issue price of RM3.54 apiece and a RM30 million cash payment to HLA.
Had the transaction been completed, HLA would have held a near 66 per cent stake of Tasek.
Tasek, which was last traded at RM3.50, was listed in 1964 on the Stock Exchange of Malaysia, now the Bursa Securities.
HLA said trading of its shares would be lifted today at 9am.
Published November 28, 2008
$1.2b orders for Keppel Corp being reviewed
The Keppel O&M orders represent 9.6% of its order book
By JAMIE LEE
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SOME $1.2 billion of orders placed with Keppel Offshore & Marine (O&M) are under review.
'... That $1.2 billion figure might spook the market, which is fragile right now.'
- A broker with a local bank
The contracts, signed a few months ago, involve a semi-submersible for Scorpion Offshore, two jack-up rigs for Seadrill and a multi-functional support vessel for Ezra Holdings' Lewek Shipping.
Keppel Corporation said yesterday it has received indications from the customers to review their options and is talking with them for mutually acceptable arrangements.
Construction work has not begun on the projects, but Keppel has received downpayments. A spokeswoman would not say how much has been paid. The review came 'in the light of the tight credit market', she said, declining to elaborate.
Keppel said that if the contracts are cancelled, this is not expected to have a material impact on its net tangible assets or earnings per share this fiscal year.
Keppel O&M has an order book of about $12.5 billion running until 2012. The $1.2 billion orders represent 9.6 per cent of the current order book.
In a separate statement, Ezra said yesterday it is reviewing its $69 million order with Keppel.
The contract was signed in May, with delivery expected in 2010, Ezra said.
Ezra is also re-thinking orders for four multi-functional support vessels that it placed with Pan-United Marine and shipyards in Norway, financial director Tay Chin Kwang told BT.
Ezra's managing director Lionel Lee said in a statement: 'We are taking a prudent approach by revisiting our capital expenditure plans and exploring our options, even though relevant financing for this vessel has been secured.'
Although the market has priced in possible order cancellations in the marine sector, a broker with a local bank said the size of the Keppel orders at risk could hit the markets.
'Order reviews have been anticipated, but that $1.2 billion figure might spook the market,' he said. 'The market is fragile right now.'
An oil-and-gas analyst said a bigger concern is that the contracts under review include those from regular customer Seadrill, an established player in the oil and gas industry.
$1.2b orders for Keppel Corp being reviewed
The Keppel O&M orders represent 9.6% of its order book
By JAMIE LEE
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SOME $1.2 billion of orders placed with Keppel Offshore & Marine (O&M) are under review.
'... That $1.2 billion figure might spook the market, which is fragile right now.'
- A broker with a local bank
The contracts, signed a few months ago, involve a semi-submersible for Scorpion Offshore, two jack-up rigs for Seadrill and a multi-functional support vessel for Ezra Holdings' Lewek Shipping.
Keppel Corporation said yesterday it has received indications from the customers to review their options and is talking with them for mutually acceptable arrangements.
Construction work has not begun on the projects, but Keppel has received downpayments. A spokeswoman would not say how much has been paid. The review came 'in the light of the tight credit market', she said, declining to elaborate.
Keppel said that if the contracts are cancelled, this is not expected to have a material impact on its net tangible assets or earnings per share this fiscal year.
Keppel O&M has an order book of about $12.5 billion running until 2012. The $1.2 billion orders represent 9.6 per cent of the current order book.
In a separate statement, Ezra said yesterday it is reviewing its $69 million order with Keppel.
The contract was signed in May, with delivery expected in 2010, Ezra said.
Ezra is also re-thinking orders for four multi-functional support vessels that it placed with Pan-United Marine and shipyards in Norway, financial director Tay Chin Kwang told BT.
Ezra's managing director Lionel Lee said in a statement: 'We are taking a prudent approach by revisiting our capital expenditure plans and exploring our options, even though relevant financing for this vessel has been secured.'
Although the market has priced in possible order cancellations in the marine sector, a broker with a local bank said the size of the Keppel orders at risk could hit the markets.
'Order reviews have been anticipated, but that $1.2 billion figure might spook the market,' he said. 'The market is fragile right now.'
An oil-and-gas analyst said a bigger concern is that the contracts under review include those from regular customer Seadrill, an established player in the oil and gas industry.
Published November 28, 2008
Cerebos strikes all the right notes
By SIOW LI SEN
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MAYBE they were there for the free lunch, but thinly traded Cerebos' results presentation on Wednesday was packed with analysts.
Altogether 17 analysts - 12 last year - were there, according to the management.
Having 17 analysts cover a stock is not so unusual for a large company, but Cerebos is hardly in the big league and, more to the point, most don't bother when it's low liquidity.
Cerebos' average daily volume is about 70,000 shares. Its low volume is partly due to parent Suntory holding some 83 per cent of the shares.
So why the interest, especially when it gets regularly criticised for its unexciting performance?
Perhaps after the last few years of giddy growth, followed by the turmoil of the past 10 months which has seen high-profile companies slash profits, a boring company such as Cerebos which manages to post higher sales and decent earnings is seen as a pretty good story.
The fact that it continued to pay out 25 cents dividend - its fifth year of doing so - giving a yield of about 11 per cent, cannot hurt either.
And the presentation didn't disappoint. In these troubled times, it was refreshing to hear management talk confidently of expansion, staying the course in investment, instead of cutting costs.
Chief executive and president Eiji Koike said Cerebos works on three-year plans; it is not managed on a quarterly basis.
Still, with the global economy mired, and CEO firings not uncommon, Mr Koike's jest 'This is my 12th year as CEO, yesterday the board had a meeting and did not ask me to resign' seemed to hit the right mood.
The serious message though was that despite this being the worst situation in a 100 years, Cerebos was well placed to continue expanding.
He said the confidence came from having navigated the Asian financial crisis, the 9/11 terrorist attack, Sars and avian flu which saw Cerebos steadily increased sales and profits.
Its latest net profit of $81 million on a turnover of $825 million, up from $68 million on a turnover of $551 million five years ago, is decent but hardly spectacular.
He pointed out that it takes a long time to build up a market.
For instance, Cerebos has been losing money in China since 2000. Last year, it had an operating loss of $10 million while sales rose 20 per cent to $19 million.
'Size of sales is too small. If sales become double, it would be much easier,' he said.
China is a long-term strategy for the company. He cited how Cerebos launched Brand's in Thailand in the 1970s but it only took off in the 1990s.
Today Thailand is Cerebos' biggest market, its operating profit contributing 45 per cent to total group turnover.
Last year, sales surged 28 per cent, with 30 per cent in the fourth quarter amid the country's intensifying political troubles.
Mr Koike reckons that once consumers take to a product, their loyalty does not waver easily. This is very critical, especially when you realise that Cerebos' selling price of Brand's, its main product, is the same, at $3 a bottle, across all markets.
Mr Koike has now set a target of $1 billion sales for 2010. It's the second time he's doing so. He also held out the possibility of making acquisitions, especially in Australia.
Back in 2000, he thought it would take the company five years to reach $1 billion. Whether he gets derailed again by the global crisis is anybody's guess.
Again he cites Cerebos' Thai operations as an inspiration. The current chief executive is Lackana Leelayouthayotin who joined in 1988. The other staff have also been there just as long and all understand how the company works. The message is consistent, simple but effective, he said.
Hopefully, the story next year will be just as pleasant.
Cerebos strikes all the right notes
By SIOW LI SEN
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MAYBE they were there for the free lunch, but thinly traded Cerebos' results presentation on Wednesday was packed with analysts.
Altogether 17 analysts - 12 last year - were there, according to the management.
Having 17 analysts cover a stock is not so unusual for a large company, but Cerebos is hardly in the big league and, more to the point, most don't bother when it's low liquidity.
Cerebos' average daily volume is about 70,000 shares. Its low volume is partly due to parent Suntory holding some 83 per cent of the shares.
So why the interest, especially when it gets regularly criticised for its unexciting performance?
Perhaps after the last few years of giddy growth, followed by the turmoil of the past 10 months which has seen high-profile companies slash profits, a boring company such as Cerebos which manages to post higher sales and decent earnings is seen as a pretty good story.
The fact that it continued to pay out 25 cents dividend - its fifth year of doing so - giving a yield of about 11 per cent, cannot hurt either.
And the presentation didn't disappoint. In these troubled times, it was refreshing to hear management talk confidently of expansion, staying the course in investment, instead of cutting costs.
Chief executive and president Eiji Koike said Cerebos works on three-year plans; it is not managed on a quarterly basis.
Still, with the global economy mired, and CEO firings not uncommon, Mr Koike's jest 'This is my 12th year as CEO, yesterday the board had a meeting and did not ask me to resign' seemed to hit the right mood.
The serious message though was that despite this being the worst situation in a 100 years, Cerebos was well placed to continue expanding.
He said the confidence came from having navigated the Asian financial crisis, the 9/11 terrorist attack, Sars and avian flu which saw Cerebos steadily increased sales and profits.
Its latest net profit of $81 million on a turnover of $825 million, up from $68 million on a turnover of $551 million five years ago, is decent but hardly spectacular.
He pointed out that it takes a long time to build up a market.
For instance, Cerebos has been losing money in China since 2000. Last year, it had an operating loss of $10 million while sales rose 20 per cent to $19 million.
'Size of sales is too small. If sales become double, it would be much easier,' he said.
China is a long-term strategy for the company. He cited how Cerebos launched Brand's in Thailand in the 1970s but it only took off in the 1990s.
Today Thailand is Cerebos' biggest market, its operating profit contributing 45 per cent to total group turnover.
Last year, sales surged 28 per cent, with 30 per cent in the fourth quarter amid the country's intensifying political troubles.
Mr Koike reckons that once consumers take to a product, their loyalty does not waver easily. This is very critical, especially when you realise that Cerebos' selling price of Brand's, its main product, is the same, at $3 a bottle, across all markets.
Mr Koike has now set a target of $1 billion sales for 2010. It's the second time he's doing so. He also held out the possibility of making acquisitions, especially in Australia.
Back in 2000, he thought it would take the company five years to reach $1 billion. Whether he gets derailed again by the global crisis is anybody's guess.
Again he cites Cerebos' Thai operations as an inspiration. The current chief executive is Lackana Leelayouthayotin who joined in 1988. The other staff have also been there just as long and all understand how the company works. The message is consistent, simple but effective, he said.
Hopefully, the story next year will be just as pleasant.
Published November 28, 2008
SGX proposes greater short-selling disclosure
It wants sellers to mark short sales orders; and it'll publish the total for each stock daily
By JAMIE LEE
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(SINGAPORE) The Singapore Exchange (SGX) yesterday proposed plans to disclose short-selling activities.
SGX has suggested in a consultation paper that brokers and customers that have gone short on securities - including structured warrants and exchange-traded funds - must mark all their orders to indicate short sales.
It has also proposed to publish the total number of short-selling orders transacted for individual securities every day. 'The marking of short-selling orders will facilitate the collation of data on short-selling activities in Singapore,' SGX said.
Another proposal by SGX is that holders of one per cent of short positions in individual securities must report their positions every month to the exchange.
The bourse deems a threshold of one per cent as a 'substantial short position'.
These measures come on top of current steps: publishing the daily list of buying-in securities and details of the price and volumes of shares bought in.
SGX said that the latest measures, if implemented, are likely to require 'legal obligations' to ensure compliance by market players. 'SGX is also mindful that a statutory framework will be required in order to place legal obligations on customers.'
Markets players said that the move would offer more transparency while easing some concern in the market over short-selling. 'A lot of people are blaming the 'shorties' for causing the panic,' said one dealer from a regional brokerage.
This move follows that of Hong Kong, which already publishes the short sales twice a day, said a broker from a local bank.
But one former dealer noted that not all traders might welcome the transparency. 'If I were a big trader, I wouldn't want people to know that I went short,' said the ex-broker.
The public can offer feedback on the consultation paper till Dec 22, it said.
SGX proposes greater short-selling disclosure
It wants sellers to mark short sales orders; and it'll publish the total for each stock daily
By JAMIE LEE
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(SINGAPORE) The Singapore Exchange (SGX) yesterday proposed plans to disclose short-selling activities.
SGX has suggested in a consultation paper that brokers and customers that have gone short on securities - including structured warrants and exchange-traded funds - must mark all their orders to indicate short sales.
It has also proposed to publish the total number of short-selling orders transacted for individual securities every day. 'The marking of short-selling orders will facilitate the collation of data on short-selling activities in Singapore,' SGX said.
Another proposal by SGX is that holders of one per cent of short positions in individual securities must report their positions every month to the exchange.
The bourse deems a threshold of one per cent as a 'substantial short position'.
These measures come on top of current steps: publishing the daily list of buying-in securities and details of the price and volumes of shares bought in.
SGX said that the latest measures, if implemented, are likely to require 'legal obligations' to ensure compliance by market players. 'SGX is also mindful that a statutory framework will be required in order to place legal obligations on customers.'
Markets players said that the move would offer more transparency while easing some concern in the market over short-selling. 'A lot of people are blaming the 'shorties' for causing the panic,' said one dealer from a regional brokerage.
This move follows that of Hong Kong, which already publishes the short sales twice a day, said a broker from a local bank.
But one former dealer noted that not all traders might welcome the transparency. 'If I were a big trader, I wouldn't want people to know that I went short,' said the ex-broker.
The public can offer feedback on the consultation paper till Dec 22, it said.
Published November 28, 2008
Reits treading warily in market minefield
Refinancing a bigger focus; acquisitions on hold; sector shakeup possible
By EMILYN YAP
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(SINGAPORE) The latest earnings season has been a chilly one for real estate investment trusts (Reits) hit by the credit crunch and a cooling property market.
Many Reits are working to shore up confidence in their credit positions. Property acquisitions are virtually off the table while industry watchers are divided on whether consolidation within the sector is on the cards.
'Reits are definitely paying more attention to financing,' said DMG & Partners Securities analyst Brandon Lee. The research house estimates that the sector has at least $4.5 billion up for refinancing in 2009 alone. With credit tightening and spreads widening, the market is watching closely for signs of trouble.
According to a CIMB-GK report, borrowing spreads for Reits have risen from an average of 150 basis points (bps) to 200-300 bps for three-year loans in the last six months.
'While average all-in cost of debt for most Reits has been contained within 4 per cent thus far . . . we expect the all-in cost for those with significant refinancing due in 2009 to rise,' said associate vice-president of research Janice Ding.
Reits have tried to soothe market anxiety in the past few weeks by releasing more details on debt. Ascendas Reit (A-Reit), for instance, won confidence votes when it said it had secured firm commitment of $200 million to help refinance a $300 million loan due in August next year.
Suntec Reit also made it a priority to refinance a $700 million loan due in December 2009. 'Whilst we have no major financing needs in the next 12 months, we are keenly aware of the liquidity crunch,' said the Reit manager's CEO Yeo See Kiat last month.
Reits also have to worry about asset devaluation as the slowing economy weighs down on rents and occupancies. Lower property values would raise gearing ratios. Frasers Commercial Trust (FCOT) booked a revaluation loss of $83.5 million in the third quarter ended Sept 30.
Reits have pushed asset acquisition plans to the bottom of the agenda. Even organic growth has slowed. Suntec Reit shelved redevelopment plans for Park Mall. CapitaMall Trust also held back enhancement plans for three malls because of high construction costs.
'We will review new commitments carefully and will not sacrifice our liquidity,' said the Reit manager's chairman Hsuan Owyang last month.
Analysts advise investors to be selective. While low unit prices have boosted yields, it would help to 'pay extra attention to (Reits') refinancing profile, especially the quantum of short-term debt due within the next six to nine months,' said DMG's Mr Lee in a note. 'We like S-Reits with strong sponsors (and) excellent track record.'
CIMB-GK's Ms Ding added: 'The presence of strong sponsors and government-linked sponsors is advantageous at this juncture.'
FCOT, for instance, managed to take a $70 million loan from parent company Fraser and Neave last week to repay debt. The trust is in talks to refinance the $70 million loan and all debt maturing next year. In response, Standard & Poor's Ratings Services took FCOT off 'CreditWatch' status and said that the outlook is stable.
ARA Asset Management Group CEO John Lim believes that consolidation in the sector seems unlikely because Reits would be more concerned about their own refinancing and asset valuation issues.
CIMB-GK's Ms Ding said that in today's market, it would be difficult 'for any single entity to have enough funds to buy over the entire (Reit) unless it's a distressed sale'.
But an industry observer believes that consolidation could happen because the sinking tide has left some Reits looking weaker than their peers. To avoid coughing up cash, a potential acquirer can offer units in itself to the target Reit, he added.
Reits treading warily in market minefield
Refinancing a bigger focus; acquisitions on hold; sector shakeup possible
By EMILYN YAP
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(SINGAPORE) The latest earnings season has been a chilly one for real estate investment trusts (Reits) hit by the credit crunch and a cooling property market.
Many Reits are working to shore up confidence in their credit positions. Property acquisitions are virtually off the table while industry watchers are divided on whether consolidation within the sector is on the cards.
'Reits are definitely paying more attention to financing,' said DMG & Partners Securities analyst Brandon Lee. The research house estimates that the sector has at least $4.5 billion up for refinancing in 2009 alone. With credit tightening and spreads widening, the market is watching closely for signs of trouble.
According to a CIMB-GK report, borrowing spreads for Reits have risen from an average of 150 basis points (bps) to 200-300 bps for three-year loans in the last six months.
'While average all-in cost of debt for most Reits has been contained within 4 per cent thus far . . . we expect the all-in cost for those with significant refinancing due in 2009 to rise,' said associate vice-president of research Janice Ding.
Reits have tried to soothe market anxiety in the past few weeks by releasing more details on debt. Ascendas Reit (A-Reit), for instance, won confidence votes when it said it had secured firm commitment of $200 million to help refinance a $300 million loan due in August next year.
Suntec Reit also made it a priority to refinance a $700 million loan due in December 2009. 'Whilst we have no major financing needs in the next 12 months, we are keenly aware of the liquidity crunch,' said the Reit manager's CEO Yeo See Kiat last month.
Reits also have to worry about asset devaluation as the slowing economy weighs down on rents and occupancies. Lower property values would raise gearing ratios. Frasers Commercial Trust (FCOT) booked a revaluation loss of $83.5 million in the third quarter ended Sept 30.
Reits have pushed asset acquisition plans to the bottom of the agenda. Even organic growth has slowed. Suntec Reit shelved redevelopment plans for Park Mall. CapitaMall Trust also held back enhancement plans for three malls because of high construction costs.
'We will review new commitments carefully and will not sacrifice our liquidity,' said the Reit manager's chairman Hsuan Owyang last month.
Analysts advise investors to be selective. While low unit prices have boosted yields, it would help to 'pay extra attention to (Reits') refinancing profile, especially the quantum of short-term debt due within the next six to nine months,' said DMG's Mr Lee in a note. 'We like S-Reits with strong sponsors (and) excellent track record.'
CIMB-GK's Ms Ding added: 'The presence of strong sponsors and government-linked sponsors is advantageous at this juncture.'
FCOT, for instance, managed to take a $70 million loan from parent company Fraser and Neave last week to repay debt. The trust is in talks to refinance the $70 million loan and all debt maturing next year. In response, Standard & Poor's Ratings Services took FCOT off 'CreditWatch' status and said that the outlook is stable.
ARA Asset Management Group CEO John Lim believes that consolidation in the sector seems unlikely because Reits would be more concerned about their own refinancing and asset valuation issues.
CIMB-GK's Ms Ding said that in today's market, it would be difficult 'for any single entity to have enough funds to buy over the entire (Reit) unless it's a distressed sale'.
But an industry observer believes that consolidation could happen because the sinking tide has left some Reits looking weaker than their peers. To avoid coughing up cash, a potential acquirer can offer units in itself to the target Reit, he added.
Published November 28, 2008
India's business heart in crosshairs
Mumbai terror strike kills many, halts market trading as financial sector tots up costs
By CONRAD TAN
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(SINGAPORE) India's financial markets were shut yesterday for the first time in more than three years after brazen terrorist attacks killed over 100 people and hurt hundreds more in Mumbai, the business capital of India.
On fire: The Taj Mahal Palace hotel in Mumbai after the attack on Wednesday night by terrorists armed with bombs and rifles
Shares of big companies listed here with Indian operations slumped, dragging the Straits Times Index (STI) lower and defying a broad rally in stocks across most of Asia.
In Thailand, the baht weakened against other major currencies and stocks also fell after anti-government protesters forced the closure of Bangkok's second airport, cutting off all commercial flights to the country's capital.
But most regionwide financial market indicators, including indices tracking credit-default swap spreads - a measure of the risk of debt defaults by big companies or governments - showed a muted reaction to the worst terrorist atrocity in India since July 2006, when bombs on Mumbai trains killed more than 200 people and injured over 700 others.
Here, shares in SingTel, which owns significant equity stakes in the biggest Indian and Thai mobile phone companies, plunged 4.2 per cent yesterday, forcing the STI into a small loss of 0.04 per cent. SingTel said that it is closely monitoring developments in both countries.
DBS Group, which has six branches with some 450 staff in India, said that all employees at its Mumbai branch were safe and that operations at the branch were unaffected by the attacks. Its shares fell 1.4 per cent.
Most other equity indices in Asia rose, except in Thailand, where the main stock benchmark slid 1.4 per cent.
'For now, markets haven't really gone into a regionwide panic. If you look at the equity market action today, it does suggest most of the markets are trading on hope after China's rate cut and positive sentiment spilling over from Wall Street,' OCBC economist Selena Ling said. 'That said, if this continues, people are going to get worried about potential contagion effects,' she added.
Here, futures contracts based on India's Nifty Index stock benchmark finished 2.3 per cent lower, after plunging 4.9 per cent earlier in the day.
Late Wednesday night, terrorists armed with bombs and rifles stormed Mumbai's main railway station, hospitals and its biggest hotels - the Taj Mahal Palace and Trident-Oberoi - as well as a cafe popular with tourists.
Reports suggested that the terrorists had targeted foreigners, especially those holding American and British passports.
The Oberoi and Taj hotels are close to the financial district, which houses the offices of Merrill Lynch, Morgan Stanley and HSBC, Bloomberg reported.
One person BT spoke to here said that he knew colleagues who had been caught up in the attacks. 'It's a bit too close to home,' he said, declining to comment further.
One Singaporean Chinese was being held hostage, Foreign Affairs Ministry spokesman Jai Sohan told reporters here last night. 'We understand that she has not been harmed in any way.' He added that the ministry was offering help to the family of the hostage and was in close touch with the Indian authorities to secure her release.
Another dozen Singaporeans were still stranded in several hotels last night, although they were not being held hostage and were in contact with Singapore's consulate staff in Mumbai, Mr Sohan said. Many other people were also trapped in hotels in the vicinity of the attacks, Reuters reported, quoting an Indian official.
A group calling itself the Deccan Mujahideen - previously unknown - said that they were responsible for the attacks.
Analysts fear that the killings in Mumbai and the confrontation in Bangkok will hurt already fragile sentiment among investors worldwide, triggering a retreat from Indian and Thai investments. The Mumbai attacks 'will have a huge negative impact on the financial sector because they targeted not just foreigners but also the professional class', said Manu Bhaskaran, head of global economic research at US consulting firm Centennial, in Singapore.
'It shows up the weaknesses in the Indian domestic intelligence and police procedures and set-up. That sounds very critical but I'm afraid that's how investors will look at it.'
Still, the latest attacks won't derail India's growth, he said. 'This would be devastating for a small country; it is something that India will absorb. I'm not worried about the longer term.'
OCBC's Ms Ling said that the damage to Thailand would likely be more immediate than in India. 'If you have a non-functioning airport and the Thai economy not doing that well in the first place, with the tourism sector being curtailed, 2009 growth will be increasingly at risk.'
India's business heart in crosshairs
Mumbai terror strike kills many, halts market trading as financial sector tots up costs
By CONRAD TAN
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(SINGAPORE) India's financial markets were shut yesterday for the first time in more than three years after brazen terrorist attacks killed over 100 people and hurt hundreds more in Mumbai, the business capital of India.
On fire: The Taj Mahal Palace hotel in Mumbai after the attack on Wednesday night by terrorists armed with bombs and rifles
Shares of big companies listed here with Indian operations slumped, dragging the Straits Times Index (STI) lower and defying a broad rally in stocks across most of Asia.
In Thailand, the baht weakened against other major currencies and stocks also fell after anti-government protesters forced the closure of Bangkok's second airport, cutting off all commercial flights to the country's capital.
But most regionwide financial market indicators, including indices tracking credit-default swap spreads - a measure of the risk of debt defaults by big companies or governments - showed a muted reaction to the worst terrorist atrocity in India since July 2006, when bombs on Mumbai trains killed more than 200 people and injured over 700 others.
Here, shares in SingTel, which owns significant equity stakes in the biggest Indian and Thai mobile phone companies, plunged 4.2 per cent yesterday, forcing the STI into a small loss of 0.04 per cent. SingTel said that it is closely monitoring developments in both countries.
DBS Group, which has six branches with some 450 staff in India, said that all employees at its Mumbai branch were safe and that operations at the branch were unaffected by the attacks. Its shares fell 1.4 per cent.
Most other equity indices in Asia rose, except in Thailand, where the main stock benchmark slid 1.4 per cent.
'For now, markets haven't really gone into a regionwide panic. If you look at the equity market action today, it does suggest most of the markets are trading on hope after China's rate cut and positive sentiment spilling over from Wall Street,' OCBC economist Selena Ling said. 'That said, if this continues, people are going to get worried about potential contagion effects,' she added.
Here, futures contracts based on India's Nifty Index stock benchmark finished 2.3 per cent lower, after plunging 4.9 per cent earlier in the day.
Late Wednesday night, terrorists armed with bombs and rifles stormed Mumbai's main railway station, hospitals and its biggest hotels - the Taj Mahal Palace and Trident-Oberoi - as well as a cafe popular with tourists.
Reports suggested that the terrorists had targeted foreigners, especially those holding American and British passports.
The Oberoi and Taj hotels are close to the financial district, which houses the offices of Merrill Lynch, Morgan Stanley and HSBC, Bloomberg reported.
One person BT spoke to here said that he knew colleagues who had been caught up in the attacks. 'It's a bit too close to home,' he said, declining to comment further.
One Singaporean Chinese was being held hostage, Foreign Affairs Ministry spokesman Jai Sohan told reporters here last night. 'We understand that she has not been harmed in any way.' He added that the ministry was offering help to the family of the hostage and was in close touch with the Indian authorities to secure her release.
Another dozen Singaporeans were still stranded in several hotels last night, although they were not being held hostage and were in contact with Singapore's consulate staff in Mumbai, Mr Sohan said. Many other people were also trapped in hotels in the vicinity of the attacks, Reuters reported, quoting an Indian official.
A group calling itself the Deccan Mujahideen - previously unknown - said that they were responsible for the attacks.
Analysts fear that the killings in Mumbai and the confrontation in Bangkok will hurt already fragile sentiment among investors worldwide, triggering a retreat from Indian and Thai investments. The Mumbai attacks 'will have a huge negative impact on the financial sector because they targeted not just foreigners but also the professional class', said Manu Bhaskaran, head of global economic research at US consulting firm Centennial, in Singapore.
'It shows up the weaknesses in the Indian domestic intelligence and police procedures and set-up. That sounds very critical but I'm afraid that's how investors will look at it.'
Still, the latest attacks won't derail India's growth, he said. 'This would be devastating for a small country; it is something that India will absorb. I'm not worried about the longer term.'
OCBC's Ms Ling said that the damage to Thailand would likely be more immediate than in India. 'If you have a non-functioning airport and the Thai economy not doing that well in the first place, with the tourism sector being curtailed, 2009 growth will be increasingly at risk.'
Thursday, 27 November 2008
Published November 27, 2008
KL may consider price cuts for electricity, gas
Minister says this will lighten burden on manufacturers
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(KUALA LUMPUR) Malaysia's government may consider reducing electricity and gas prices to lighten the burden on its manufacturers, International Trade and Industry Minister Muhyiddin Yassin said yesterday.
Malaysia has in recent weeks announced policies to cushion the impact of slowing global demand for its goods by waiving import duties on more than 400 products including iron, steel and textiles. Like other Asian countries, its manufacturing industry is expected to be hard hit by the global economic slowdown.
'We have not brought the matter up to the government for consideration. It's difficult to say at this point if we will reduce the cost of electricity and gas,' Mr Muhyiddin told reporters at a manufacturing conference. 'We have to study its timing because the matter was only reviewed by the government about a year ago.'
Economic growth in the country of 27 million people is expected to slow to 3.5 per cent next year, according to government forecasts, although private sector economists are predicting growth to slow by as much as 1.5 per cent.
On free-trade talks between the United States and Malaysia, Mr Muhyiddin said talks will resume once US President-elect Barack Obama takes office in January.
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'We have been informed by the new administration that is coming in in January that they want to hold back until the new administration comes in,' he said. 'What has been progressed will continue. We want to move forward. We have been given a new mandate by the Cabinet on how to progress on some of the contentious issues.'
Formal talks for a free-trade agreement have stalled mainly due to what the US describes as Malaysia's protectionism policies. The US, Malaysia's second biggest trading partner, wants more transparency in the bidding for government contracts and the country's affirmative action policy, which favours the Malay majority, has also often been a sore point in discussions. -- Reuters
Published November 27, 2008
Failed deal sends Ramunia shares tumbling
It loses half its market value as the share dives 53% to close at 61 sen
By PAULINE NG
IN KUALA LUMPUR
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OIL and gas fabricator Ramunia Holdings lost more than half of its market value yesterday after a proposed reverse takeover by Malaysia International Shipping Corporation (MISC) was scrapped following a due diligence exercise.
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Ramunia's share price had been supported over the past months by expectations of the RM3.2 billion (S$1.3 billion) deal being concluded, so the market outcome was no surprise.
The counter hit limit down and was the top loser, shedding 69 sen, or 53 per cent, to close at 61 sen.
Its warrants and preference shares fared even worse, plunging 66 and 64 per cent respectively.
MISC, whose wholly owned subsidiary MSE Holdings was to emerge with 72 per cent of Ramunia after selling its entire interest in Malaysia Marine & Heavy Engineering (MMHE) to Ramunia in exchange for new shares, did not reveal the findings of the due diligence exercise.
It simply said that MSE will terminate the deal because the findings were unsatisfactory. Taking over Ramunia would have increased the group's shipyard capacity.
Aseambankers said that the decision to call off the deal could be 'macro-related' to the global financial crunch and the slowdown in the oil and gas industry, as control of fabrication space is less of a priority now that oil prices have sunk to US$50 a barrel.
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But the market reaction underscored the importance of MISC to Ramunia. Without MISC, it is a definite loser, Aseambankers analyst Vincent Khoo said in a client note.
'Operationally, Ramunia without MISC will be dogged by its poor track record, management and credibility,' he said.
But Mr Khoo does not rule out MISC taking a second look at Ramunia down the track, though at a lower price given its intent to acquire fire-sale assets amid the current slump.
Last month, Ramunia was one of five companies to benefit from the award of 15 contracts valued at a total of RM2.8 billion by Petronas' exploration and production arm Petronas Carig-ali.
Although MMHE and another government-linked company Sime Engineering walked away with the lion's share, Ramunia's portion is worth RM140 million.
But even with new orders exceeding RM700 million from Shell and Petronas Carigali, Aseambankers expects Ramunia to be loss-making over the next few years 'due to poor execution'.
It missed out on a US$685 million contract from India's Oil and Natural Gas Corp this year because it could not come up with a performance bank guarantee and insurance certificate.
MISC, meanwhile, has been downgraded to an 'underperform' by CIMB Research in anticipation that tanker earnings will come under pressure from weaker shipping rates as the Organisation of Petroleum Exporting Countries (Opec) cuts oil production and global demand for petrochemicals softens.
MISC's container shipping division is likely to suffer significant losses this year and next as a result of the rout in freight rates for the Asia-Europe trades, said CIMB Research, adding that an anticipated flood of newbuilding deliveries next year could compound matters.
Published November 27, 2008
Brokers put out calls valid for only 20 days
70% cut in duration of recommendations driven by volatile market conditions
By TEH HOOI LING
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REFLECTING the volatile market conditions, brokers are putting out recommendations which are valid for only 20 days, according to Trade Ideas Monitor (TIM), a Web-based aggregator of trade ideas, which now counts 419 broking firms and asset managers globally as its clients.
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| Mr Berthoud: Brokers' recommendations in August were the most bearish since TIM's launch in Oct 2005 |
Compared with 2007, the shorter duration represented a 70 per cent compression of the time for which recommendations remained valid. Meanwhile, for the month of August, the ideas to short stocks made up 45 per cent of all ideas submitted.
'Institutional brokers, in their recommendations to clients during August 2008, were collectively the most bearish they have ever been since the TIM was launched in October 2005,' said Colin Berthoud, director of youDevise - the developer and operator of TIM.
'As the market has come down, this bearishness subsided somewhat. Since late October, however, the percentage has risen significantly again. And to date in November, it is at 48 per cent, a trend that does not bode well for the market, as we've seen.'
TIM is a Web-based application where institutional brokers can send ideas to all their clients simultaneously. Meanwhile, the buy side people, be they hedge funds, long-only funds or proprietary traders, can - via the Web page - view and track on a single screen the performance of all the ideas they receive from their various brokers.
The application allows fund managers to more accurately compensate brokers who give them the most profitable trade ideas.
'Trade ideas put research into action,' said Mr Berthoud, who is also a co-founder of youDevise. 'In many ways they are the most important and certainly most measurable aspect of what a broker delivers within commission.'
Trade ideas are specific to a client. Recommendations like how much and when to invest and when to take profit are made, after taking into consideration factors like the fund's size, its investment style, etc.
Hence trade ideas are different from research in that they are actionable and measurable to an individual client, versus research, which is 'passive and measurable in the abstract', said youDevise in its materials.
Prior to such applications, brokers generally call their clients with their ideas. The ideas may be scribbled down on a piece of paper, and subsequently forgotten. There is no way of tracking the profitability of these ideas.
youDevise makes money by charging brokerages a fee to use its application. Those on the buy-side, however, can get the service for free. Mr Berthoud said youDevise, which started in London, now has an office in New York and one in Hong Kong which was set up only six months ago.
He added that there are 670 individuals in Asia from 70 buy-side firms who can access TIM now. Globally, 6,000 people - half in Europe and the remaining in the US and Asia - are using its application.
Mr Berthoud said TIM is gaining traction in the market place. New long and short ideas hit a record 40,649 in October 2008, up 455 per cent from a year ago. The 40,000 level is twice as high as the average of 20,000 per month recorded for the first eight months of this year.
'We anticipate 50 per cent growth (in terms of clients) again next year, despite market conditions: trade ideas is a growth market even in the downturn,' said Mr Berthoud.
In addition to equities, youDevise has ambition to be the platform for trade ideas in commodities, foreign exchange and options trading as well. It may expand into these areas with strategic partners.
youDevise was established with an initial seed capital of £pounds;1 million (S$2.3 million). The company has 40 staff who collectively own 85 per cent stake in it. The remainder is held by a customer that invested in the company early in 2007.
This year, youDevise expects its turnover will be about £pounds; 4 million.
According to Mr Berthoud, youDevise has been cash flow positive in each quarter this year.
Published November 27, 2008
Investors affected by stoppage can appeal
By JAMIE LEE
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INVESTORS left naked with uncovered short positions due to Tuesday's trading disruption can appeal for a waiver of the penalty for failed share delivery, the Singapore Exchange (SGX) said yesterday. The securities and derivatives trading systems were disrupted at 4.09 pm two days ago due to connectivity issues at the primary telecommunications network, SGX said.
A Business Times reader wrote in to say that he was unable to cover his short position as a result. The reader said that he took short positions on several counters in the morning and planned to cover them near the end of trading. He said that he was told by his broker that the link to the SGX trading platform was down. 'Am I still liable to be fined the 5 per cent penalty for not covering my intra-day shorts?' he asked.
In September, SGX introduced a penalty of 5 per cent of the value of a failed trade, or at least $1,000. 'Market participants affected by the interruptions can lodge an appeal with SGX through their broker,' an SGX spokesman said yesterday. 'The connectivity incident will be taken into consideration where relevant in our assessment of the merits of any application for a waiver over failed share delivery.'
Published November 27, 2008
What might 2009 hold for stocks?
By R SIVANITHY
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IT'S almost year-end and it is customary at this time to try to forecast what next year might hold for the stock market. In the past, this was usually done in the final week of December but given the huge uncertainty which confronts economies everywhere, it's safe to say that a view given today isn't going to be substantially different from a view delivered in five weeks' time.
Before attempting any crystal ball-gazing, though, it's best to state that the biggest lesson to note from 2008 is one which we repeatedly highlighted in this column over the past 12 months: the tendency among analysts and supposedly independent researchers to understate risks while overestimating their powers of analysis.
Many assumed the crisis would quickly blow over - one house kept repeating the mistaken view that this is a normal cyclical slowdown and that the US economy would prove resilient to any shocks - and so relied on historical comparisons and/or traditional price- earnings or PE-based calculations to urge clients to buy, only for those clients to find out painfully that not only are earnings or the 'E' almost completely unknown, but that the worst of the crisis may not yet be over.
The bailout of Citigroup this week, the still-uncertain fate that awaits General Motors and lingering worry over some of the other large US banks should be proof enough that there could still be more problems ahead for the market to navigate.
Second, forget the decoupling story that was popular this time last year. The interconnectedness of global finance and the dependence of markets on Wall Street have rubbished the popular theory that some experts had bandied about regarding Asia decoupling from the US and forging ahead on its own. If anything, the fact that Asian markets have collapsed by more than the US one should lay to rest this piece of misplaced wisdom for good.
Having said that and bearing in mind that risk is still a big factor, it's also probable that the huge cash injections by the US and European governments will eventually help reverse the economic slide. In other words, the interconnectedness that dragged markets down in 2008 should work in their favour when recovery kicks in. The crucial question, of course, is when.
Most experts agree that a recovery, if it occurs in 2009, will take hold only in the second half. We could quite easily question the wisdom of experts these days given their spectacular failures in 2008, but this time you'll find no argument here with this view. The US government will cut interest rates to zero and keep its printing presses running at full steam even at the risk of inflating yet more bubbles. One observer not so long ago wrote that the proper way out of this mess is to raise interest rates, encourage savings and stop the never-ending inflating of bubbles but given government shortsightedness, such a course of action is unlikely - so, sooner or later, the weight of money being thrown at the problem economy will have an effect.
However, because it is unlikely that a bubble that was seven years in the making can be unravelled in just one year, our guess is that at the very earliest, it will be the third quarter of 2009 before the pump-priming has an effect.
Now, assuming that this downturn does not drag out too long, the best time to invest in stocks would therefore be some time before the end of the first half next year, though it has to be said that investors should not expect a quick return to the heady days of 2005-2007. At best, returns over 2009 would be single-digit and the more investors recognise this, the better.
We'd also place China stocks high on the list of what to avoid. There's good reason why these counters have lost 70-80 per cent in 2008 and it isn't just earnings worries that will continue to plague the sector, but also credibility, governance and survival issues.
We'd also recommend avoiding property stocks for the first six months at least. Like China, the sector benefited from overblown expectations, lax analyst recommendations, easy credit and insufficient consideration of risk. Moreover, the physical market has not even begun to correct meaningfully yet and it could be years before prices find a bottom.
Finally, between banks and conglomerates, the latter are probably better positioned to ride out the global downturn. Local banks have been too reliant on the domestic property market for their loans and lack a diversified revenue base within the region, let alone further afield. Their numbers can only worsen with time and so it would be best to avoid the sector for now.
Government-linked conglomerates offer much better exposure to an overseas upturn, so these stocks would be worth keeping an eye on. For now, though, it would be wise to keep in mind that cash is king and patience is a virtue - at least for the next 5-6 months.
Published November 27, 2008
Washington gets its rescue act together, finally
Analysts positive about the new ambitious measures
By ANDREW MARKS
NEW YORK CORRESPONDENT
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AFTER 10 weeks of a historic financial crisis marked by a string of heart-pumping shocks, failures and last-minute rescues, Washington has finally done what looks to be something different.
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In the last two days, it has thrown in measures aimed not just at stabilising the credit markets and keeping investor panic from taking down more major financial institutions, but also at reviving the flagging economy itself.
Tuesday's announcement of two separate lending programmes that will inject another US$800 billion directly to prop up the failing financial system, came less than 24 hours after the Treasury Department and the Fed committed nearly US$350 billion to propping up the embattled Citigroup financial empire.
In addition to the massive commitment by the Fed and Treasury, President-elect Barack Obama began detailing a government stimulus package on Tuesday that he wants ready to sign into law soon after his confirmation on Jan 20, aimed at creating or saving 2.5 million jobs that will cost upwards of US$500 billion.
This has been a hugely important two days for the financial markets and the economy. After two months of this back-and-forth debate within the government of a 'should we or shouldn't we' over how far to go to rescue the banks and the economy, they've finally crossed the Rubicon.
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Essentially, they are now saying they're going to print as much money as it takes to turn this disaster around, said Marc Pado, chief market strategist at Cantor Fitzgerald.
The latest measures by the US government to rescue a comatose financial system and forestall an economy already spiralling into what could be the worst contraction in 75 years from becoming the next Great Depression, are historic in themselves, said Wall Street economists.
The impact of the Fed's latest round of moves was felt immediately in the mortgage market. Risk premiums on mortgage bonds and debt issued by Fannie Mae and Freddie Mac tightened significantly in response to the Fed's lending programmes, which will provide US$200 billion in non-recourse loans to holders of asset-backed securities, and will purchase up to US$600 billion in Fannie Mae and Freddie Mac debt and mortgage-backed securities.
'The government has finally come around to the belief that there's no choice but to make an all-out effort, to just open the taps and pump as much money as it can into the system right now. That's what it comes down to,' said Joel Naroff, president of Naroff Economic Advisors. 'There's no way to know how much these actions by the government will help to turn around the credit markets or bring back the economy or how long it will take to do so, but the Fed now believes that unless it takes this course we could face a depression,' he said.
Wall Street has rejoiced as the government has finally taken steps to directly inject money not just to support failing banks but consumers as well, sending the Dow Jones industrials on a rally that has regained about 1,000 points or 12 per cent in just three days.
On Tuesday, the market had a see-saw session that ended positively, as investors weighed a round of gloomy economic reports against the government's latest efforts to stabilise the financial system. The Dow finished up 36 points at 8,480, and the S&P 500 was up 5.58 points at 857.
Stocks appeared to be set up for a day of profit-taking yesterday after the three-day surge, as investors were faced with another round of economic data confirming the growing severity of the recession.
Before the opening bell, the Commerce Department reported that orders to US factories for manufactured goods plunged in October by the largest amount in two years as the economy weakened. The 6.2 per cent drop was more than double the 3 per cent decline economists expected.
The Commerce Department also said that Americans cut back their spending in October by the largest amount since the 2001 terrorist attacks. Consumer spending plunged by one per cent last month, worse than the 0.9 per cent drop that had been expected.
A Labor Department report said that new jobless claims fell more than expected last week from a 16-year high, to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000.
Stocks nose-dived in early trading yesterday, as the Dow retreated 165 points, or 1.95 per cent in the first minutes of what was expected to be another volatile and choppy day.
Big swings resulting from low trading volumes ahead of the Thanksgiving Day holiday were also expected. At 10 am, the bluechip index was down 111 points, or 1.3 per cent, at 8,368.28.
Published November 27, 2008
Airlines shun Bangkok amid safety concerns
Passengers stuck, cargo stranded as standoff continues
By NISHA RAMCHANDANI
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(SINGAPORE) With Bangkok's Suvarnabhumi International Airport under siege and the political standoff still continuing, several airlines decided to cancel flights to the Thai capital.
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They include Singapore Airlines (SIA), Jetstar Asia and Tiger Airways which cited safety concerns at the paralysed airport.
Thailand's national carrier Thai Airways, Cathay Pacific and AirAsia were also among those that grounded flights to Bangkok yesterday.
Thai Airways' 140 inbound and outbound flights from Suvarnabhumi are 'temporarily suspended' until the airport 'resumes normal operations'. Sixteen Thai Airways flights had to be diverted to Don Muang International Airport, while another three flights were diverted to U-Tapao Airport. Thai Airways said it expected to lose revenues of about 500 million baht (S$21.4 million) a day as a result of the closure.
SIA has also suspended all flights to and from Bangkok, including its flights from Tokyo Narita, until further notice.
Airlines such as SIA, Jetstar Asia and Tiger Airways have said that passengers affected by the suspended flights have the option of a change of flight date, a change in destination - although the difference in fares needs to be topped up - or a full refund.
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Tiger Airways and Jetstar Asia have both cancelled morning flights to and from Bangkok today, but are adopting a wait-and-see approach before committing to any decisions for evening flights.
In a national television address last night, Prime Minister Somchai Wongsawat said Thailand's Cabinet will hold an emergency meeting today to discuss 'measures' against protesters in Bangkok who have broken the law.
Reuters reported that Mr Somchai also refused to heed an army call for him to step down and call a snap election, saying his government was democratically elected and would continue to work for the good of the country. Earlier, Thai army chief General Anupong Paochinda asked the government to call fresh polls.
More than 3,000 passengers were stuck at Suvarnabhumi overnight, until the Thai authorities started evacuating some travellers to nearby hotels yesterday. Meanwhile, freight operators, hoteliers and travel agencies are also taking a hit.
SIA Cargo, which operates three weekly freighter services to Bangkok, has stopped accepting any cargo into and out of Bangkok until further notice. Cargo that came in yesterday to Singapore from Kuwait flew directly to Singapore instead of stopping at Bangkok.
In the event of a prolonged closure, SIA Cargo plans to truck cargo into Bangkok, bearing any additional costs.
Meanwhile, the scheduled FedEx flight to Bangkok is being held at its Asia Pacific hub - Subic Bay in the Philippines - pending the reopening of Suvarnabhumi. Inbound shipments are also being held at Subic Bay.
Over at DHL Express, the closure of Suvarnabhumi has led to inbound and outbound shipments being routed to other airports in Thailand.
'Shipments to and from other regional countries - Laos, Cambodia, Vietnam and some countries in South Asia - are being supported through our Singapore hub to ensure minimum disruption,' added Stephen Fenwick, senior vice-president of operations, DHL Express (Asia Pacific).
Resort operator Banyan Tree Holdings said that while Banyan Tree Bangkok remains fully operational, it has received some cancellations. The group's third-quarter results were already affected by the forced closure of Phuket Airport in August and the unrest is deterring travellers from visiting Thailand. Banyan Tree had warned earlier this month that if the political turmoil is protracted, it could have significant impact on the group.
Some 20 customers who were bound for Bangkok have already called up tour operator CTC Holidays to cancel or change their holiday plans to other destinations such as Hong Kong and Vietnam, while another 10 travellers are currently stranded in Bangkok.
'We've established contact with them and advised them to extend their stay,' Alicia Seah, CTC's senior vice-president of marketing and PR told BT, pointing out that the closure of Phuket Airport in August had only lasted two days.
In true Singaporean fashion, the stranded travellers are making the best of their 'extended vacation' by squeezing in some extra shopping.
Meanwhile, the Ministry of Foreign Affairs (MFA) has advised Singaporeans to postpone visits to Bangkok if there is no pressing need. MFA also advised Singaporeans who decide to travel to Thailand to register with the MFA online, so that they can be contacted in case of emergencies.
With additional reporting by Ang An Shing and Jonathan Gan
Published November 27, 2008
Thai prime minister snubs army call to step down
He says no to snap poll; Cabinet to discuss 'measures' against protesters
By GREG LOWE
IN BANGKOK
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THAILAND's Cabinet will hold an emergency meeting today to discuss 'measures' against protesters in Bangkok who have broken the law, Prime Minister Somchai Wongsawat said in a national television address last night.
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| Marooned: Stranded Western tourists at Bangkok's Suvarnabhumi Airport yesterday. The airport authority yesterday evacuated 3,000 tourists trapped at the airport, and applied for a court order to evict PAD protesters. It said it did not know when flights would resume. |
Mr Somchai also refused to heed an army call for him to step down and call a snap election, saying his government was democratically elected and would continue to work for the good of the country, Reuters reported yesterday.
Earlier, Thailand's military chief General Anupong Paochinda called on the government to dissolve Parliament, as the first step to end months of political turmoil which culminated in thousands of anti-government protesters occupying Bangkok International Airport on Tuesday.
Gen Anupong said the anti-government People's Alliance for Democracy (PAD) should end its occupation after the government made the first move. PAD rejected the idea and vowed to continue its occupation until PM Somchai resigns. House dissolution was not enough, it said.
Three months of protracted protests and violent clashes - which have killed at least five people and injured hundreds - have shattered investor sentiment, a Singapore-based businessman stranded in Bangkok told The Business Times.
'Singaporean business people are scared of doing business in Thailand. They will simply invest in Vietnam where everything is controlled,' said Eric Rosenkrantz, chairman, mStream Media, who was also stranded in Phuket three months ago when PAD protesters forced the airport there to close temporarily.
'I've been coming to Thailand for 20 years. I own property here, but now I fear for Thailand's future,' he said. 'These protests are destroying its economy and its tourism.'
Yesterday, Singapore Foreign Minister George Yeo said in Santiago, Chile: 'The situation appears to be rather confused. We are very troubled by it. We hope that all groups in Thailand will have the political will to compromise and find a way out for the country. And, indeed, it is something the Thai people need for themselves.'
Mr Yeo added: 'The tourism industry is badly affected and I'm worried that the Asean summit will also be affected. There has been no contingency plan on the summit because we assumed that it would be held. But now with the present situation unfolding, there is a cloud of uncertainty.'
A Cambodian Foreign Ministry spokesman said the prime ministers of Cambodia, Laos and Vietnam, meeting in Vientiane, had formally asked Asean whether the meeting should be postponed, according to a Reuters report. The Asean regional summit is scheduled for Dec 14-17.
Last night, PM Somchai declined to comment on the demands, while government sources said General Anupong was in danger of being sacked.
Analysts said dissolving Parliament would not help to defuse the crisis.
'It is unlikely to resolve the entrenched political divide,' said Ismael Wolff, political and security analyst at Bangkok-based PSA Asia. 'There's no reason to expect PAD to recognise any election that fails to deliver a government that doesn't reflect their minority view.'
However, he said the airport occupation needs to be viewed in a wider context where the government has been unwilling, or unable, to enforce the rule of law for the past three months over fears of a public backlash.
'But it does show that security is extremely lax if crudely armed individuals can so easily overrun such a sensitive and important location,' said Mr Wolff.
Four bomb blasts targeting both pro- and anti-government protesters injured at least 12 people in the early hours yesterday morning.
And Airports of Thailand yesterday evacuated 3,000 tourists trapped at the airport, and applied for a court order to evict the PAD. It said it did not know when flights would resume.
Political observer Thitinan Pongsudirak said tension will continue to rise but is unlikely to lead to widespread mass violence.
The Stock Exchange of Thailand closed at 395.22 points, up 0.9 per cent, on hopes that a political resolution was in sight.
PAD has led a three- month occupation of Government House demanding the ouster of the People's Power Party (PPP), which it says is a proxy for ex-prime minister Thaksin Shinawatra, who was deposed in a 2006 military coup and lives in self-imposed exile after being sentenced to jail on corruption charges last month.
The Thai military has so far refused to use force to evict PAD from Government House or end the airport occupation. It has also resisted calls from PAD to stage a coup.
A Thai court ordered anti-government protesters yesterday to end their siege. The Bangkok Civil Court granted an injunction sought by the operator of Suvarnabhumi airport, saying that the protests had infringed on people's rights, Reuters reported.
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